The UK Chancellor of the Exchequer, Philip Hammond, has formally announced the formation of R5-SHCH Connect, a partnership between R5, the London FinTech leading the digital transformation of Emerging Markets Foreign Exchange trading, and the Shanghai Clearing House, the financial market infrastructure, established to clear and settle China’s financial products.
During last week’s UK-China Economic and Financial Dialogue, Chinese Vice-Premier Ma Kai met with the Chancellor in Beijing. At the conclusion of the meeting, a series of financial trade agreements were announced, including R5-SHCH Connect, a financial market infrastructure that connects banks in China directly with the London FX market. R5-SHCH Connect demonstrates the close cooperation that exists between the UK and China under the framework of the Belt and Road initiative, and is a direct result of the deepening economic ties between the two countries.
Mr Hammond commented, “As the Renminbi becomes increasingly international, and as China continues to drive forward hugely transformative initiatives, such as the Belt and Road project, I believe that Britain can be China’s natural partner in the West for delivering these ambitious projects.”
Jon Vollemaere, CEO of R5 commented, “R5-SHCH Connect is an infrastructure that enables banks in China to trade FX in London, the largest and most liquid FX market. It is a key component of RMB Internationalisation, and will cement London’s position as the leading global financial centre. This is a great example of the UK and China working in collaboration, with R5 and the Shanghai Clearing House providing complimentary services, and recognising the importance of a strong partnership, to deliver new and innovative services.”
R5-SHCH Connect is an electronic marketplace, which enables banks located in China to trade offshore RMB and other currencies in the London FX market. It acts as a high-speed link between China and London, which provides Chinese banks with increased access to FX trading, enhances liquidity in major currencies and advances the Internationalisation of the RMB.
R5-SHCH Connect reinforces London’s leading position in global FX, in RMB trading, and in FinTech. It reflects the rise of the RMB as a global currency, and demonstrates the next stage of China’s International financial reform, by introducing new financial innovation as part of the Belt and Road initiative.
To date, banks based in China have not been able to trade the offshore RMB easily, but R5-SHCH Connect allows them to access this market for the first time. Institutions already trading in the London market will benefit from additional counterparties and deeper liquidity, provided by new Chinese entrants.
R5-SHCH Connect will launch with 8 Chinese banks connecting to the London FX market, with further onshore Chinese banks being added in early 2018.
The UK government has published Policy Outcomes of the 9th UK-China Economic and Financial Dialogue, which makes further reference to R5-SHCH Connect and to the internationalisation of the RMB, as follows:
“Both sides welcome the agreement reached between Shanghai Clearing House and R5, the London based Capital Market Fintech, to create a Cross Border FX Clearing Solution.”
“Both sides welcome the internationalization of the RMB and recognize London’s vital role in supporting global use of the RMB and facilitating international access to China’s domestic capital market.”
“Both sides agree to continue to promote the China-UK cross-border RMB business and support the use of RMB as the settlement currency in bilateral trade and investment. Both sides support the UK RMB clearing banks to fulfil their role to promote the development of the off-shore RMB market in London.”