We only need one European hub for RMB, says CIC chairman
London is still the most favoured market to become a hub for offshore RMB appreciation, says the chairman of China's $410 billion sovereign wealth fund.
by Emily Blewett on Jun 15, 2012 at 13:33
Investors only need one centre as an RMB offshore centre in Europe in order to facilitate the currency’s internationalisation, said Laurence Lau, chairman of the Chinese sovereign wealth fund CIC Investment,
Speaking at an investor conference in London on Thursday, the chairman of one of the world's biggest sovereign wealth funds said the UK capital is still the preferred location in the bid to liberalise the Chinese currency.
‘It’s really about the size of the market and London is still the most volume and liquid,’ said Lau. ‘With three or four centres (in Europe) you can arbitrage, but that’s an unnecessary movement.’
'Investors are more likely to invest if there is just one centre. It's really about getting economies of scale,' he added.
HSBC issued the first public offshore RMB-bond in April this year as UK Chancellor George Osbourne said that London would become an offshore RMB trading centre.
In what is considered a step towards further towards internationalisation, China's finance ministry said on Thursday it will issue 23 billion yuan ($3.6 billion) in offshore RMB bonds in Hong Kong as part of a plan to sell what are known as 'dim sum bonds' directly to foreign central banks for the first time ever.
While Chinese authorities have been more vocal about monetary policy alongside taking various steps such as expanding the quota for Qualified Foreign Institutional Investors (QFII), there is still no official indication of when the offshore and onshore markets - the CNY and CNH markets.
'There is a tension between opening the currency up whilst trying to protect the existing economy,' said Nigel Pridmore, a partner at the financial advisor Linklaters who also spoke on the panel debate alongside Lau.
'There is a fear in China of letting money dictate the economy.'
Looking at the investor opinion of Chinese currency, in a poll of fund selectors at a Citywire event in New York, selectors were split on whether the RMB will replace the dollar as a reserve currency with many believing it would never take over from the US dollar.
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