London to become Chinese currency hub
Britain's Chancellor of the Exchequer George Osborne (Back L) stands with Chinese Vice premier Ma Kai (Back R) during a signing ceremony at the Diaoyutai Guesthouse on October 15, 2013 in Beijing, China.
Britain has agreed a raft of financial measures with China. The measures, unveiled by Britain’s finance chief on a visit to Beijing, should beef up London as one of the world’s top financial centers. And they should also boost China’s role as a major player on global financial markets.
Under the deal, there will be a direct trading link between the British pound and the Chinese currency, the renminbi. London will become the first foreign center allowed to invest directly in domestic Chinese stocks and bonds. Good for London. But Steve Barrow, a currency strategist with Standard Bank, says it will also give the renmimbi a bigger role as a reserve and a trading currency, and help China in its financial rivalry with the United States.
“It’s going to take China a very,very long time to get even close to the U.S.’s dominance, but at the moment you have to say that’s the direction in which it’s heading,” Barrow says.
The renminbi is now the world’s ninth most actively-traded currency. Having the dollar in the number one slot brings the U.S. enormous economic benefits. But, Barrow claims, the current shenanigans in Washington put that at risk.
“Many perceive that U.S. policymakers are throwing that advantage away and possibly even throwing it the way of China,” he says.