Britain said on Friday it hopes
to set up a currency swap line with China soon to help finance trade, a move
that will enhance London's drive to become a leading offshore center for Yuan
trade.
China, in an effort to internationalize
the yuan and eventually make it
a world reserve currency, has already agreed swap lines with more than 15 other
countries, mostly emerging markets.
The Bank of England said on
Friday it would work with China's central bank to sign a final agreement
shortly on a reciprocal three-year yuan-sterling swap, building on its
statement last month that it was ready "in principle" to adopt the
swap line.
Britain, always anxious to
bolster London's status as Europe's biggest financial center, launched an
offshore yuan currency and bond market to great fanfare last year.
A swap deal would cement its role
as the leading center in the Group of Seven industrialised nations for offshore
trade in the yuan - also known as the renminbi - helping it to see off
potential rival yuan centers such as Frankfurt, Paris and New York, market
watchers say.
Figures from global transaction
services organisation SWIFT show that Britain is the leading center for
offshore yuan trade outside Asia and has made far more progress in getting
companies to invoice in yuan than the United States, for example.
By comparison, the yuan bond
market in Hong Kong, the biggest offshore center for yuan trade, grew to around
350 billion yuan ($55.7 billion) in a little over two years from 2010,
according to Thomson Reuters data.
The yuan is not freely convertible
but China plans to make it basically convertible as early as 2015 and
eventually put it on a par with the U.S. dollar.
The Bank of England said the swap
arrangement would be used to finance trade and direct investment between the
two countries and to support domestic financial stability if needed.
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