Hong Kong: London's role as a major hub yuan offshore is likely to survive the British decision to leave the European Union, but the vote could help promote the internationalization of China's currency, encouraging multiple hubs yuan in the block.
Brexit shock could increase, not hinder, Yuan Internationalization
Following the popular consultation, market observers and domestic Chinese media outlets have raised fears the leadership of London as a center for offshore yuan would be undermined, potentially delaying Beijing's efforts to internationalize the yuan.
But as the dust begins to settle, some bankers and analysts believe that pessimism was exaggerated. That does not mean that there will be an impact, but the movement can encourage China to promote trade yuan in cities of continental Europe and expand the global presence of the coin.
"We expect London to maintain its status as the center of world's most important currencies, although some other financial city services may be at risk of being transferred to other countries. Brexit head of global banking and markets Hang Seng bank, adding currency trading is currently the key part of the internationalization of the yuan.
Brexit comes at a difficult time. China is pushing to increase the international use of yuan ahead of its inclusion in the basket of Special Drawing Rights of the International Monetary Fund in October, while trying to control capital outflows.
London has played an important role in the internationalization of the yuan, which is also known as renminbi (RMB). It was the second largest offshore clearing center in the world for the currency in March, said the operator SWIFT payments.
passport rights
In the last five years, major Chinese banks have established an extensive trade in yuan and clearing infrastructure in London and the first Chinese yuan sovereign bond issued outside China are listed in the city in June.
In 2016, more than 50 yuan-denominated bonds listed in London, higher than any other financial center outside of Greater China, according to the London Stock Exchange Group.
"As the hub key ex-Asia RMB, with infrastructure laid and are already in use, flows not dry. London is ahead of other designated centers in the EU bloc by some margin" based Shanghai-Z Ben Advisors said in a note to clients.
One concern is that Britain could lose essential financial services rights "passport" which allow companies to UK-licensed for the distribution of financial Items and services throughout the EU, said Andrew McGinty, partner Hogan Lovells in Shanghai.
British financial institutions lose rights EU passport and RMB-denominated products can not be sold cross-border in the EU without fresh approvals they are having an impact on China's willingness to follow the position of the United Kingdom as its principal RMB in international financial mar high focus?
Many business leaders believe it is unlikely that the UK would lose these rights in full.
long-standing international investor base in Britain, which makes it attractive London to China as an offshore center, would be essential for the EU-UK, Brian Schwieger, head of equities at the LSE Group told Reuters last week .
"The close relationship between London and China is a key example by operating as a financial center is so important to the UK economy and the European Union," he said.
POSSIBLE BOOST?
Still, Brexit could lead Beijing to protect their bets and encourage more hubs offshore yuan across the EU, analysts say.
"Frankfurt, Paris and Zurich are all very active in the business of offshore yuan," said Kim Ngan man, deputy head of treasury shares in the Hong Kong branch of China Everbright Bank.
German group Deutsche Boerse has agreed to the creation of an exchange operator joint venture with the Shanghai stock exchange, in what many saw as a major blow to Frankfurt.
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