Chinese banks join hands with LSEG for yuan trading in UK

To boost offshore trading in yuan in the UK, two Chinese state-owned banks have signed a deal with the London Stock Exchange Group.
The agreement on the trading of the Chinese currency was signed in London, coinciding with the maiden visit of Chinese Premier Li Keqiang to Britain.
A partnership with Bank of China will allow the LSEG and the lender to jointly assess and design yuan clearing and financing processes for future yuan-denominated products, Chinese media quoted an LSEG statement.
The BOC, China's third-largest lender by assets, will work toward becoming a member of the LSEG, it added.
The LSEG also formed an alliance with the Agricultural Bank of China to facilitate access to capital by Chinese companies through LSE's Primary Markets operations and to support investor education and awareness programs in China and the UK.

China Construction Bank, the second-largest lender in China by assets, will become the first clearing service centre for the Yuan trading in London.

The agreements and the reported establishment of a clearing service centre will be "a landmark first step for yuan to break into the European market," Dai Shugeng, an international finance professor at Xiamen University told state-run Global Times.
"China will be able to shorten the process of internationalising its currency by at least 10 years, if it can tap into the European market," Dai said.
"London is a good place to start, because it is experienced in handling offshore currency trading and the performance of its financial market has strong impact on eurozone countries," he said.

Chinese companies and authorities have made a raft of moves to boost offshore yuan trading this year. On January 5, BOC's London branch issued 2.5 billion yuan worth of yuan-denominated bonds in the city.
In April the Shanghai Stock Exchange said it had approved a scheme that allows mutual trading of Shanghai and Hong Kong shares, a move that would boost offshore yuan trading in Hong Kong.
Zhang Lei, a macroeconomics analyst with Minsheng Securities, told the Global Times that the yuan needs to be used more often during trade settlements before it could become a global currency.
Only 1.43 per cent of payments were made in the yuan in April, ranking it the seventh most-used currency in the world, the daily quoted the Society for World Interbank Financial Telecommunication as saying.

Some 0.63 per cent of transactions were made in the yuan in January 2013, it said.