UK and China poised for currency swap deal

Governor Zhou Xiaochuan and Governor Mervyn King Sir Mervyn met with Governor Zhou Xiaochuan in China

The Bank of England is in negotiations with its Chinese counterpart on a deal likely to boost trade between the UK and China in the yuan.

The Bank and the People's Bank of China are close to signing a three-year currency swap arrangement, governor Sir Mervyn King said.

The UK is looking to become a centre for the Chinese currency, also known as the renminbi.

Chancellor George Osborne welcomed the agreement as an "important step".

Such agreements allow central banks to swap currencies and can be used by firms to settle trade in local currencies rather than in US dollars, as happens now, since China's currency is not fully convertible to other currencies.

Mr Osborne added that it "cements London as the Western hub for the fast-growing renminbi market".

'More liquidity'

UK banks hold 35bn yuan ($5.5bn; £3.5bn) worth of deposits in the Chinese currency,

Last year, the UK Treasury announced plans to make London - the world's largest currency trading hub - the leading international centre for trading the yuan outside mainland China and Hong Kong.

"London is growing rapidly as a centre for renminbi business," Sir Mervyn said on his visit to China.

"In the unlikely event that a generalised shortage of offshore renminbi liquidity emerges, the Bank will have the capability to provide renminbi liquidity to eligible institutions in the UK," he said.

China has been gradually relaxing strict controls on the value of its currency and on flows of capital.

Beijing has been using these pacts as part of its push for a more global role for the yuan.

It has a swap agreement with Brazil worth $30bn and has also signed similar agreements with other trading partners such as Japan, Australia and Hong Kong.

More on This Story

Related Stories

More Business stories

RSS

Features & Analysis

  • Stained glass of man with swordFrance 1 England 0

    The most important battle you have probably never heard of


  • Golden retriever10 things

    Dogs get jealous, and nine more nuggets from the week's news


  • Pro-Israel demonstrators shout slogans while protesting in Berlin - 25 July 2014Holocaust guilt

    Gaza conflict leaves Germans confused over who to support


  • The emir of Kuwait Sheikh Sabah al-Ahmad al-Jaber al-SabahFreedoms fear

    Growing concern for rights as Kuwait revokes citizenships


Elsewhere on the BBC

  • CastleRoyal real estate

    No longer reserved for kings and queens, some find living in a castle simply divine

Programmes

  • Leader of Hamas Khaled MeshaalHARDtalk Watch

    BBC exclusive: Hamas leader on the eagerness to end bloodshed in Gaza

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.