China Backs London As Yuan Trading Center

China is giving formal approval to London becoming an offshore yuan trading center on Thursday, said the Financial Times. London would join Hong Kong, Singapore and Taipei to compete for a share of the growing yuan exchange business as China pushes a series of policy initiatives to turn the yuan into a major global exchange currency.

“China’s push to make London an offshore yuan centre is an exciting development as it is an important financial centre and also a hub for metals trading, a key focus area for China,” said Linan Liu, a senior strategist at Deutsche Bank in Hong Kong.

“Still, London’s role along with Singapore and Taiwan will be largely complementary to Hong Kong as this is where the infrastructure and the liquidity exists,” she added.

Seven percent of China’s international trade is now settled in yuan as of the first quarter, up from just 1 percent a year ago, according to data from Hong Kong and China central banks. The rise reflects China’s rapid easing of regulations on the use of yuan in international transactions.

Yuan denominated deposits in Hong Kong has soared to nearly 10 percent of total deposits by end July, up from just one percent last January.