China and the City of London A Deepening Alliance

In recent years, the City of London has established itself as the foremost international hub for trading the Chinese renminbi outside of China, reflecting the growing and complex financial relationship between Britain and Beijing. This relationship is rooted in a 2013 agreement between the then chancellor George Osborne and his Chinese counterpart Ma Kai, allowing London to become a global clearing centre for the renminbi. In 2024 alone, institutions in the Square Mile processed a remarkable ¥31 trillion, or £3.3 trillion, in renminbi transactions. The value of renminbi currency trades in London has surged, tripling from £50 billion in the first quarter of 2017 to £170 billion in the closing quarter of 2024.

The commercial benefits to the City are pronounced. Lenders and traders earn steady fees by facilitating spot exchanges as well as more complex financial contracts such as forward agreements and options. State-owned Chinese banks have established a commanding presence in London, with the City now serving as the main base for Chinese banks conducting business across Europe. Major Western banks have capitalised on these links to broker entry into China’s accelerating debt markets, which now rank as the world’s second largest.

Beyond currency trading, ties have extended to green finance and corporate bonds. The City of London Corporation helped inaugurate the UK China Green Finance Centre in 2019, facilitating investment in sustainable industries including solar panels and electric vehicles. Offshore green bonds issued by the London branch of China Construction Bank have contributed financing for China’s Belt and Road Initiative, a project that has drawn international criticism over debt concerns for developing countries.

The City’s China Advisory Council, formed in 2010, has steered its engagement strategy, drawing members from entities with close governmental connections. The Corporation’s presence overseas is notable, with just three other international offices worldwide beyond its locations in Shanghai and Beijing. Such initiatives have attracted significant business, with international firms relying on London’s expert banks and lawyers to issue so called panda bonds in China’s onshore market.

Despite the prosperity these links generate, concerns have surfaced regarding the leverage such a relationship may provide Beijing. Recent diplomatic incidents and security breaches have heightened anxieties among policymakers. High profile critics have pointed to China’s prior use of economic pressure in international disputes, warning that the depth of financial integration could leave London vulnerable should tensions escalate.

The City’s leadership maintains that engagement with China reflects government policy and underscores the necessity of involving China in climate finance discussions, given its status as the world’s largest polluter. Nonetheless, analysts caution that the pursuit of commercial gain may risk overshadowing long term national security priorities, with some calling for a more measured approach to future cooperation.