For the last few years the Chinese economic leadership has been set on getting China’s currency, known as both the yuan and the renminbi, to the position of a globally traded instrument. Slowly but steadily more steps are taken to promote yuan internationalization and today we learn about another big move.
The Chinese plan to issue sovereign debt in London, in the form of Treasury bonds denominated in yuan, according to a report today from the UK’s Financial Times. This will follow the start of short term debt issuing by the Chinese central bank, the People’s Bank of China, in the British capital.
These steps will most likely be announced during a state visit to the UK by the president of China, Xi Jinping, next week. This marks a success for the British government’s attempts to guarantee London’s future position as the leading center for international yuan investments outside of China.
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Although never officially stated, China sees its currency as a future global reserve currency in a manner that will rival the dominance of the U.S dollar. China is already the largest trade partner for many economies around the world and using the yuan for the basis of international cross border trade seems like an obvious development. However, if the yuan is to become a tool for investing it needs to become more accessible to the global marketplace.
This is where the British come in, as the UK government promotes London as the perfect location for Chinese investments. Besides its history and location, China might agree to choose London as the international hub for yuan investment as it is an easy way to access the American market without letting the U.S benefit. However, the Chinese also want to usurp some of the UK’s clout in the global markets – for example by challenging the London gold price fix.