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Since the global financial crisis, the Chinese regime has been pushing the yuan to become more international and has been advocating moving away from the dollar as the international reserve currency. They have lifted restrictions and allowed the yuan to trade in Hong Kong. Now London hopes to cash in on this trade and establish itself as an offshore yuan trade center. British Chancellor George Osbourne was in Hong Kong on Monday for talks with the Hong Kong Monetary Authority. Here's that story.
With China's large share of world trade, Osbourne is optimistic about the opportunity for its currency on the world stage and says London can serve as a "gateway" to Western markets.
[George Osbourne, British Chancellor of the Exchequer]:
"In June last year RMB had a world foreign exchange market share of just 0.9 percent. This compares to China's share of the world's trade of 11 percent and I think London is perfectly placed to act as a gateway for Asian banking and investment in Europe and a bridge to the United States."
Yet if the Chinese yuan is to ever replace the dollar, it faces challenges and policy conflicts within the regime. Many US lawmakers believe the yuan is undervalued and some reformists in China are also calling for the currency to rise. But an undervalued currency benefits China's exporters and many in the regime want to maintain the status quo.
The city of London hopes to cash in on this offshore yuan trade and with China as the world's biggest exporter, holding yuan does look like an attractive prospect to many central banks. But many are still skeptical about the yuan, which is still not fully convertible and the Chinese regime's economic plans are far less transparent than those of Western countries.