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

  • Woman in swimming pool Green stuff

    The element that makes a familiar smell when mixed with urine


  • Plane at Shannon airportShannon's call

    The airport that hosted a roll-call of presidents


  • Record playing on turntableVinyl destination

    The eight tribes of people who keep buying records


  • The Duke and Duchess of Cambridge at RAAF Amberley airbase near Brisbane on 19 AprilIn pictures

    Fighter jets and screaming crowds for William and Kate


Elsewhere on the BBC

  • ITChild's play

    It's never been easier for small businesses to get their message out to the world

Programmes

  • Tuna and avacadoThe Travel Show Watch

    Is Tokyo set to become the world's gourmet capital?

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.