Brexit uncertainty hasn’t stopped RMB trading activity in the UK reaching record highs, according to a new report published by the City of London Corporation.
The report, London RMB Business Quarterly, shows that an average of £85 billion of RMB was traded in the UK on a daily basis in the second quarter of 2019, up nearly 10% compared to the first quarter of the year and up more than 20% year-on-year (YoY).
Additionally, the report shows that between June and August 2019, the average daily clearing volume by the UK designed RMB clearing bank – China Construction Bank London Branch – was RMB43.97 billion, up 18.4% from the last report published in July. This means that since June 2014, a cumulative total of RMB37.84 trillion has been cleared in the UK.
The report also highlights that RMB cross-border settlement volumes saw a sharp rise. By the end of August, the total RMB cross-border settlement between China and the UK had increased 48% YoY to RMB377 billion, close to the total volume of RMB370 billion last year.
“In the face of considerable uncertainty, the fundamentals of London and the UK continue to shine brightly,” says Catherine McGuinness, policy chair at the City of London Corporation. “It’s no secret that the UK has long been a world leader in foreign exchange, clearing more euros than anywhere else in Europe, more rupees than anywhere in India and more dollars than New York. Naturally, we’ve also grown to become the leading hub for RMB trading, with levels of the Chinese currency going through London far outstripping that of any other financial centre. I look forward to seeing this trend continue long into the future.”
Similarly, Laetitia Moncarz, director payments markets, APAC region at SWIFT, comments: “The UK remains a leader in global FX despite the challenges created by the ongoing uncertainties, and continues to be a vital piece in China’s RMB internationalisation efforts.”
Moncarz says that SWIFT’s latest RMB tracker shows that the UK now handles 43.5% of the world’s RMB offshore FX transactions, nearly 20% more than its nearest rival, Hong Kong.
“China clearly continues to view London as a strategic location for introducing Chinese capital markets to foreign investors. For example, earlier this year it launched London-Shanghai Stock Connect, which allows foreign firms to list their shares in mainland China for the first time,” she adds.
Moncarz notes that the UK also benefits as a large payments hub due a number of factors such as an attractive tax regime, government incentives and access to capital markets. However, she warns that this “doesn’t mean that the UK’s dominant position is guaranteed”.
“The current picture could change, especially if more financial businesses relocate from London to continue serving clients in the EU,” says Moncarz.