Singapore has vaulted ahead of London as the world’s biggest offshore trading hub for the renminbi outside Hong Kong, as rapidly growing commercial ties between China and southeast Asia propel use of the Chinese currency.

The development highlights not only the rapid internationalisation of the renminbi but how financial centres in Europe and Asia are jostling for a slice of the business.

London has become the main city outside Asia for dealing in the Chinese currency, with a series of initiatives undertaken since George Osborne, UK finance minister, two years ago moved to help the UK capital become a trading centre for renminbi and the staging post for Chinese investment into Europe.

However, data from Swift, the global payments system, showed that the value of renminbi payments processed through Singapore had risen 375 per cent in the year to March, overtaking London in February.

Singapore accounts for 6.8 per cent of all offshore renminbi-denominated currency payments, compared with 5.9 per cent for London, according to Swift. Hong Kong accounts for 72 per cent.

The data are a symbolic blow to London, since the UK government has frequently cited Swift figures to assert the UK’s dominance of renminbi trading outside mainland China.

More than 40 per cent of global foreign exchange trading takes place in London, and the expectation is that the City will eventually play a similar role in renminbi trading as China gradually opens up its capital markets and liberalises its currency.

But the lead of Singapore – Asia’s largest foreign exchange trading centre – reflects the fact that the renminbi’s international rise has so far been driven primarily by its use in trade finance – for which the tiny island nation serves as southeast Asia’s hub.

United Overseas Bank, Singapore’s third-largest bank by assets, said the volume of payments it had handled in renminbi had risen more than 88 per cent in the past ten months. “We expect this growth to continue, fuelled by the fast-growing trade corridors between southeast Asia and China,” said John Kong, head of strategic business at UOB’s transaction banking unit.

Singapore also has a head start over London in having the infrastructure in place to allow easier access to and processing of renminbi locally, in the form of a clearing bank – China’s state-owned ICBC.

“Ever since last year’s nomination of ICBC we have been expecting the Singapore renminbi payments flows to accelerate, especially as Chinese companies use it as a hub to reach countries in the Association of Southeast Asian Nations,” said Claus Kwon, Swift's head of securities markets, Asia Pacific.

The Bank of England and People’s Bank of China signed an agreement to set up a renminbi clearing bank in London last month, but no institution has yet been named.

In spite of the apparent competition between Singapore and London, the two centres in February agreed to co-operate on developing trading of the renminbi as part of an unprecedented “financial dialogue” between the two centres.

The Swift data confirm the continued growth in the renminbi’s international use, despite the recent depreciation widely believed to have been engineered by China’s central bank.

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