Britain and Singapore have agreed to co-operate on developing trading of the renminbi, the Chinese currency, as part of an unprecedented “financial dialogue” between the two global financial centres.

The move, agreed this week during the first visit by UK chancellor George Osborne to the Asian city-state, is the first example of co-operation between renminbi centres outside China.

It comes two years after Mr Osborne agreed a similar arrangement with Hong Kong, by far the largest offshore renminbi centre, which aimed to turn London into an offshore trading centre for the currency.

Singapore, a tiny island nation of 5.4m people, is building itself up as the renminbi hub for southeast Asia, capitalising on its increasing use in intra-regional trade in the fast-growing economies of the Association of Southeast Asian Nations.

London, meanwhile, is developing fast as Europe’s offshore trading hub for China’s currency. When Mr Osborne visited Beijing and Hong Kong in October last year, he signed deals to allow direct renminbi-sterling trading and to allow Chinese banks to set up branches in the UK.

Mr Osborne this week agreed with his Singapore counterpart, finance minister Tharman Shanmugaratnam, to set up a private sector forum “to boost the development of the offshore renminbi market”.

The forum, whose members have yet to be chosen, would “focus on increasing co-operation between the UK and Singapore markets”, the two men said.

“Outside China and Hong Kong, London and Singapore are the leading centres for renminbi trading and financing, and serve different investor bases and business communities,” Mr Shanmugaratnam said.

“[They] can co-operate to promote fungibility of the [Chinese currency] globally, encourage innovation in renminbi products and services and meet the growing appetite for renminbi investment instruments.”

Mr Osborne said: “Sharing our knowledge and expertise will open up new opportunities for both of our economies and help the UK succeed in the global race.”

Singapore and London have forged closer ties between their financial businesses in the past 12 months.

Fullerton Fund Management, owned by Temasek, Singapore’s state investment company, said on Tuesday it was poised to open an office in London. Manraj Sekhon, chief executive, said: “We have been seeing increasing interest in our Asian and emerging market strategies from institutions in the [European] region.”

London is the world’s largest foreign exchange trading centre, while Singapore is Asia’s largest. Both also have large and growing asset management industries. The two nations share the English language and legal system.

The cities’ two main exchanges – the London Stock Exchange and SGX, the Singapore bourse– recently forged closer ties. The UK exchange last year agreed to provide its Asian counterpart with technology to upgrade the Singapore operator’s securities clearing systems.

Singapore is also the focus of Asian expansion by LSE rivals in the US and Europe, which view the Asian city-state as a springboard for expansion in the region.

Last week, Deutsche Börse said it was in talks with Singapore authorities about opening a clearing house, which would make the city-state the German exchange operator’s hub for expansion in the region.

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