Chinese banks may be able to set up London branches for wholesale businesses as early as next year.
According to the China construction bank international investment forum, the move aims to internationalise the Chinese currency and boost its capital market.
Experts say it also corresponds with London's status as the largest foreign exchange market, and is beneficial for both China and the UK.
British businesses may adopt wider and more frequent use of the Chinese currency next year, as Chinese banks have received the green light to upgrade their subsidiaries to branches in the country. Officials say the process could further lift the city's role as an off-shore renminbi hub in the west.
"London is by far the largest trading center in the world for foreign currencies. It's natural as RMB becomes increasingly used in international trade, London becomes the center for trading in RMB certainly in this half of the world. So we have been keen to help develop the market, " Mark Boleat, Chairman of London Policy and Resources Committee, says.
So far, the only Chinese bank that holds a branch licence in London is the Bank of China, whose first branch dates back to 1929. Other major Chinese banks initiated their presence since the early 1990s, but in the form of subsidiaries. The difference, according to industry players, could be extremely influential.
"Foreign banks' branches could use capital and resources from their head offices, yet subsidiaries may only use its own money to do business. Moreover, branches of foreign banks enjoy looser regulation than subsidiaries set up locally. Finally, the operating structure of foreign branches is simpler than subsidiaries," Fang Wenjian, General Manager of Bank of China Londong Branch, says
British regulation caps the lending limit of foreign bank subsidiaries at 25 percent of its total capital for any single client. Branch operation, industry players say, would be easier for overseas business development as subsidiaries are under stricter scrutiny for investment limits and capital returns.
"We think that it enables the potential for RMB internationization to be realized. The more people here wanting to do business with RMB, the better it will be for Britain, but more importantly for China as well," Alderman Fiona Woolf, Lord Mayor of City of London, says.
Chinese investment in Britain lifted 95 percent last year and the isle country has received the most Chinese capital of all European countries since 2012. The trend is predicted to continue.
Source: CCTV
