Brexit shock may boost, not hinder, yuan internationalization
By Michelle Chen and Michelle Price
HONG KONG (Reuters) - London's role as a major offshore yuan hub is likely to survive Britain's decision to leave the European Union, but the vote could help foster the Chinese currency's internationalization by encouraging multiple yuan hubs in the bloc.
In the aftermath of the referendum, market-watchers and domestic Chinese media had raised fears London's leading role as an offshore yuan hub would be undermined, potentially setting back Beijing's efforts to internationalize the yuan.
But as the dust begins to settle, some bankers and analysts believe the pessimism was overdone. That is not to say there will not be an impact, but the move may encourage China to foster yuan trading in cities in mainland Europe and so expand the currency's global footprint.
"We expect London to keep its status as the world's largest foreign exchange center though some of the city's other financial services may have the risk to be moved to other countries following Brexit," said Andrew Fung, head of global banking and markets at Hang Seng Bank, adding FX trading is currently the key part of the yuan's internationalization.
Brexit comes at a difficult time. China is pushing to increase international use of the yuan ahead of inclusion in the International Monetary Fund's Special Drawing Rights basket in October, while also trying to control capital outflows.
London has played an important role in the internationalization of the yuan, which is also known as the renminbi (RMB). It was the world's second-largest offshore clearing center for the currency in March, payments operator SWIFT said.
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