By: Dr. Mike Campbell

Despite economic reforms and a degree of creeping personal liberty, the driving philosophy of The People’s Republic of China remains communism; so the concept of London setting itself up as the international hub and leading market for trading in the Yuan (or Renminbi as it is also known) is decidedly odd. However, China replaced Japan as the world’s second largest economy and seems to want to have greater influence in the wider world, so perhaps the communists see it as a necessary evil.

The British government has made much, recently, of London’s role as one of the planet’s major hubs for finance and business, if not its natural capital (if you’ll pardon the pun). Fears that raising an EU-wide financial tax of just 0.1% on all business transactions led to a rapid “no” from the UK and led to Mr Cameron “wielding the veto” during an EU summit meeting to move towards greater fiscal union and to support the Euro, making the UK the odd man out within the EU.

According to the Chancellor of the Exchequer, George Osborne, "London is perfectly placed to act as a gateway for Asian banking and investment in Europe,"
The Chinese currency has eased by 8% against the Dollar since I started to write these pieces in August 2009. However, over this time period, the Dollar has weakened by 18% against the Yen. China’s performance since emerging from the global recession has arguably been the strongest in the world, so it could easily be argued that the Chinese government has kept a firm hand on the tiller with respect to its currency. Of course, a cheap Yuan makes Chinese goods cheaper overseas.
For China to play a more influential role politically and as a leading economy, the Yuan will need to be traded more freely. If the plans come to fruition, analysts suggest that it may bring billions of pounds into the City; London’s financial heart. Projections from a leading UK think-tank, Chatham House, suggest that the Yuan could be used to settle as much as $1 trillion worth of trade transactions by 2020.