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HSBC raises two billion Renminbi in the City

London hopes to become the big foreign capital for trading in the Chinese currency

HSBC yesterday held a bond auction denominated in the Chinese renminbi currency (RMB) in London. This was not only the first such auction in the city, but the first one to be held anywhere other than China or Hong Kong, and the bank hopes that it will be a step forward in the development of Britain as a centre of the international trade in renminbi.

The three year renminbi bonds which were sold are known as "dim sum" bonds, and the bank sold RMB 2bn - just under £200m. The sale was timed to occur with the launch of a new working group, backed by Bank of China, Barclays, Deutsche Bank, HSBC and Standard Chartered, which aims to internationalise China's currency and consolidate London's role in the trade. The city currently holds 26 per cent of the offshore foreign exchange renminbi market, and holds RMB 109bn deposits. This remains a fraction of Hong Kong's RMB 566bn holdings, but London is only fighting for second place in the market, with Singapore its biggest potential rival.

Jean-Marc Mercier, HSBC's global head of debt syndication, told the Financial Times that:

The bank, which had originally planned to raise over RMB 1bn, had been pleasantly surprised by the strength of demand from European investors, including fund managers, private banks and institutions.

He indicated that European investors were taking up about 60 per cent of the issue, with most of the remaining 40 per cent going to Asia.

The fact that the bond raised around twice what it was expected to on a return of 3 per cent indicates that investors are still keen to buy in to China, and the bank revealed that 60 per cent of the activity had come from European traders.

The Chancellor was present at the renminbi working group's launch, and said:

Let me be clear – London is not in competition with Hong Kong, it is a complement – providing a Western hub for RMB business.

These developments are the culmination of a team effort by global banks with operations in London and Hong Kong, strongly supported by the UK, mainland Chinese and Hong Kong Authorities. . .

London has a long history of global financial inventiveness - from founding the first organised market for insurance for trading around the world hundreds of years ago, to the development of the Eurodollar markets through the 1960s, 70s and 80s, and global foreign equities trading in more recent times.

RMB trading is the next step along a 400 year road.

The white elephant in the room is the fact that London, and any other potential foreign renminbi centre, is being heavily reined in by Beijing. China has only recently come to accept the possibility that the renminbi could be an international reserve currency, and is still maintaingin strict controls - although these are slowly being liberalised. On Monday, the People's Bank of China widened the trading band of the renminbi by 0.5 per cent to 1 per cent, allowing it to fluctuate slightly more against the dollar, which it remains pegged to.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty Images
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How can Britain become a nation of homeowners?

David Cameron must unlock the spirit of his postwar predecessors to get the housing market back on track. 

In the 1955 election, Anthony Eden described turning Britain into a “property-owning democracy” as his – and by extension, the Conservative Party’s – overarching mission.

60 years later, what’s changed? Then, as now, an Old Etonian sits in Downing Street. Then, as now, Labour are badly riven between left and right, with their last stay in government widely believed – by their activists at least – to have been a disappointment. Then as now, few commentators seriously believe the Tories will be out of power any time soon.

But as for a property-owning democracy? That’s going less well.

When Eden won in 1955, around a third of people owned their own homes. By the time the Conservative government gave way to Harold Wilson in 1964, 42 per cent of households were owner-occupiers.

That kicked off a long period – from the mid-50s right until the fall of the Berlin Wall – in which home ownership increased, before staying roughly flat at 70 per cent of the population from 1991 to 2001.

But over the course of the next decade, for the first time in over a hundred years, the proportion of owner-occupiers went to into reverse. Just 64 percent of households were owner-occupier in 2011. No-one seriously believes that number will have gone anywhere other than down by the time of the next census in 2021. Most troublingly, in London – which, for the most part, gives us a fairly accurate idea of what the demographics of Britain as a whole will be in 30 years’ time – more than half of households are now renters.

What’s gone wrong?

In short, property prices have shot out of reach of increasing numbers of people. The British housing market increasingly gets a failing grade at “Social Contract 101”: could someone, without a backstop of parental or family capital, entering the workforce today, working full-time, seriously hope to retire in 50 years in their own home with their mortgage paid off?

It’s useful to compare and contrast the policy levers of those two Old Etonians, Eden and Cameron. Cameron, so far, has favoured demand-side solutions: Help to Buy and the new Help to Buy ISA.

To take the second, newer of those two policy innovations first: the Help to Buy ISA. Does it work?

Well, if you are a pre-existing saver – you can’t use the Help to Buy ISA for another tax year. And you have to stop putting money into any existing ISAs. So anyone putting a little aside at the moment – not going to feel the benefit of a Help to Buy ISA.

And anyone solely reliant on a Help to Buy ISA – the most you can benefit from, if you are single, it is an extra three grand from the government. This is not going to shift any houses any time soon.

What it is is a bung for the only working-age demographic to have done well out of the Coalition: dual-earner couples with no children earning above average income.

What about Help to Buy itself? At the margins, Help to Buy is helping some people achieve completions – while driving up the big disincentive to home ownership in the shape of prices – and creating sub-prime style risks for the taxpayer in future.

Eden, in contrast, preferred supply-side policies: his government, like every peacetime government from Baldwin until Thatcher’s it was a housebuilding government.

Why are house prices so high? Because there aren’t enough of them. The sector is over-regulated, underprovided, there isn’t enough housing either for social lets or for buyers. And until today’s Conservatives rediscover the spirit of Eden, that is unlikely to change.

I was at a Conservative party fringe (I was on the far left, both in terms of seating and politics).This is what I said, minus the ums, the ahs, and the moment my screensaver kicked in.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.