UK to become Chinese currency hub

Chancellor George Osborne has called for a new alliance between Britain and Asia that would reinforce London as the gateway for eastern investment in the west.

In a speech in Hong Kong, his first of 2012, he said the UK wanted to expand business and trade with Asia.

“We in Britain can build on our position as the home of Asian investment and Asian finance in Europe, provided we’re bold enough to do what it takes to make that happen, and we will,” he told the Asian Financial Forum.

“Even more than it already is, we want Britain to become one of the easiest places to invest, to raise capital, to start a business, to expand and to export from.”

Channel 4 News Economics Editor Faisal Islam blogs on why Britain is already looking east for its future investment.

Renminbi trading hub

Mr Osborne also announced plans to develop London as the western hub for trading in the renminbi (RMB), the Chinese currency. Officials said this would reinforce Britain’s role as the gateway between the East and the West.

Mr Osborne said that, despite continued tough economic conditions, Britain had “reasons to be bold”.

“A richer, stronger Asia is an opportunity for the world, not a threat – we should be bold enough to say it and to explain it to our own populations,” he said.

“Second, we in Britain can build on our position as the home of Asian investment and Asian finance in Europe – provided we’re bold enough to do what it takes to make that happen, and we will.

“And third, with a new alliance between Britain and our friends in Asia, we can be bold in defeating the forces of protectionism and make global finance a force for good, not instability.”

Substantial economic benefit

Mr Osborne said his visit to Hong Kong, which is followed by Beijing later and then Tokyo, allowed him to further his discussions with the Chinese authorities to establish a remninbi, or RMB, market in London.

“London is perfectly placed to act as a gateway for Asian banking and investment in Europe, and a bridge to the US,” Mr Osborne said.

“This is not just an accident of timezone, or our language, although both are important.

“It reflects London’s strength in product development, its regulatory structure and the depth, breadth and international reach of its financial markets.

“We are by some distance the world’s largest foreign exchange market; and the growing use of RMB in those global markets will bring substantial benefit to Chinese economic development and the wider world economy.”

Meanwhile Ernst and Young’s economic forecaster the Item Club has said the UK may already have slipped back into recession. The think-tank said GDP shrank in the final quarter of 2011 and predicted it would shrink again in the current financial quarter.