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UK narrows HK’s lead in RMB internationalisation

https://live.theasianbanker.com/
Written by Alicia Garcia-Herrero
  • Apr 04, 2025
  • 7 min read

Hong Kong remains the leading offshore renminbi (RMB) centre, while London has emerged as a key player, leveraging its position as the world’s largest foreign exchange (forex) trading hub and its extensive access to Chinese capital markets.

As China pushes for greater RMB adoption, market-driven opportunities could amplify London’s role, especially in bridging European and global demand for RMB-denominated assets and transactions.

The process of RMB internationalisation began in 2009, with Hong Kong as a major actor. After setbacks following China’s 2015 stock market crash, RMB use rebounded, especially post-2022.

Hong Kong has been central to RMB internationalisation since 2004. Recognised as an RMB centre in 2009, after the People’s Bank of China (PBOC) launched a pilot programme, it facilitates RMB-denominated trade settlements between mainland China and foreign businesses.

Hong Kong’s regulatory framework, developed with the PBoC and the Hong Kong Monetary Authority (HKMA), includes the largest RMB swap line, now at RMB 800 billion ($109.7 billion).

Singapore became the second offshore RMB centre in 2011, followed closely by London. The establishment of an offshore RMB clearing bank in 2014 further entrenched London’s position, alongside the increase in the Bank of England’s swap line with the PBoC to the equivalent of $350 billion, matching that of the European Central Bank (ECB).

More recently, both Singapore and London have been losing market share, while Hong Kong has continued to grow. Hong Kong’s divergence may stem from its decision not to follow Group of Seven (G7) sanctions on Russia, as the RMB has been used to invoice trade with Russia, not only by China but also by other emerging economies.

As the only offshore RMB centre outside Asia, London is well-positioned to meet the massive demand from European and global investors not served by Hong Kong or Singapore. London also extends trading hours when Asian markets are closed, catering to traders worldwide.

More importantly, London leads other cities in RMB trading infrastructure, with broad access to Chinese capital markets. United Kingdom (UK) has nearly as many Qualified Foreign Institutional Investor (QFII) licences—a prominent means for foreign investors to access Chinese domestic assets—as the rest of Europe combined. This gives London a unique capacity to host investors with direct connections to Chinese assets, attracting more RMB transactions.

China’s push to internationalise the RMB in developing countries has created more opportunities for London to address forex trading in emerging market currencies. As a result, London’s RMB turnover nearly tripled between 2019 and 2022, with its share of offshore RMB forex transactions rising from 21% to 26%. In contrast, Hong Kong experienced a significant drop in its RMB forex transactions from 41% to 34%. 

RMB internationalisation will continue, given China’s economic size and growing global links. Its speed depends on capital account opening—which remains unlikely—and the impact of United States (US) currency sanctions.

Hong Kong will remain the largest offshore centre, but London has advantages such as a well-established regulatory environment, excellent market access, deep financial markets and a strong forex infrastructure.

As China’s RMB internationalisation is driven by market forces, London’s role is likely to grow.

Alicia García-Herrero is the chief economist for Asia Pacific at Natixis.