The Chancellor announced Britain’s intention to become the first western country to issue a bond in China’s currency, the renminbi (RMB), as the sixth annual UK-China economic summit took place in London.

In a clear sign of the growing strength of Britain and China’s economic ties, the government confirmed its intention to issue a RMB bond in the coming weeks and months, subject to market conditions. The size of the bond will be confirmed at the time of issuance, but is expected to be worthy of benchmark status in the market.

View the Policy Outcomes Paper and Factsheet from the UK-China 6th Economic and Financial Dialogue

This will be the first non-Chinese issuance of sovereign RMB debt and will be used to finance Britain’s reserves. Up to now, Britain has only held reserves in US dollars, euros, yen and Canadian dollars, so today’s announcement signals the RMB’s potential as a future reserve currency.

The Chancellor also welcomed China Development Bank’s (CDB) announcement on the same day that it has successfully issued a RMB 2 billion (£200 million) in London, the first by a quasi-sovereign outside of Greater China.

Together, these bond issuances will cement Britain’s position as the most important RMB market outside Greater China, and represent the next step in the government’s long term economic plan to establish Britain as the centre of global finance.

Britain is already the fastest growing market in Europe for RMB payments, more than doubling volumes from July 2013 to July 2014.

In 2013, total RMB foreign exchange trading in London averaged $25.3 billion per day, which was a 50 per cent increase from 2012.

The other elements of the package agreed at the UK-China Economic and Financial Dialogue (EFD), which represent the most substantive set of measures ever agreed between the two countries, include:

• CDB’s announcement that it intends to opens a representative office in London, its first in Europe. Along with CDB’s RMB bond issuance, this is a major vote of confidence in the government’s long term economic plan and in London’s role as the most global international financial centre
• ICBC, the world’s biggest bank, has been given approval by the Prudential Regulation Authority to receive a branch licence. It is the first Chinese bank to open a UK branch in over 50 years
• granting a licence to Lloyd’s of London to open a Beijing branch, bringing them closer to the major insurance companies based in Beijing and enabling them to do more business in China
• Britain’s inclusion in China’s forthcoming renminbi Qualified Domestic Institutional Investor (RQDII) scheme when it launches. This will allow institutional investors in China to invest into financial markets in the UK, and for RMB funds to flow from China to the UK
• allowing existing investment funds to be used by UK-based asset managers with Renminbi Qualified Foreign Institutional Investor (RQFII) licences, allowing them to invest directly into Chinese securities. Four UK asset managers have now been awarded RQFII licences

Chancellor George Osborne said:

Let me be clear. Our long term economic plan is working, but the job isn’t done. We need to export to fast growing economies like China, and attract more investment to our shores.

To do that, we need to make sure China’s currency is used and traded here, as that will be not only be good for China, but good for British jobs and investment too.

That’s why I’m delighted that today we agreed the next big step in making London – already the global centre for finance – a major global centre for trading and investing the Chinese currency too.

The sixth UK-China EFD also discussed the global economic situation and trade, as well as infrastructure, investment and urbanisation.