Yuan the Conqueror: China to launch yuan-backed metals futures in London to challenge US dollar

Yuan the Conqueror: China to launch yuan-backed metals futures in London to challenge US dollar
A metals futures contract denominated in Chinese currency may soon be launched at the London Metal Exchange (LME), according to the exchange chief executive, Matthew Chamberlain.

“At present, investors are trading our products in US dollars. We would definitely like to explore the possibility of launching products denominated in offshore renminbi,” Chamberlain said in an interview with the South China Morning Post.

The LME, which is owned by Hong Kong Exchanges and Clearing (HKEX), currently allows traders to use the Chinese currency as collateral. Last July, the HKEX stock market also launched yuan-denominated gold futures.

LME’s chief executive didn’t specify when the new metals contracts would start changing hands in London. However, Chamberlain is reportedly confident that yuan-backed futures contracts are destined for success, as the Chinese currency is becoming more and more used in global finance.

“Chinese investors are definitely very active customers at the LME. They are trading through mainland brokers who are members of the LME or western firms,” he said, as quoted by the media.

“We believe with the increasing number of Chinese trading in our market, there would be more Chinese companies wishing to join the LME.”

The first steps towards internationalizing the Chinese renminbi were taken nearly a decade ago, when Beijing allowed the currency to be used in trade and investing. In 2016, yuan was included in the Special Drawing Right (SDR) basket alongside the US dollar, the Japanese yen, the euro, and the British pound. The move granted yuan the status of a reserve currency.

Earlier this year, China, the world’s biggest crude importer, rolled out a yuan-denominated oil contract that attracted nearly 27 billion yuan ($4 billion) during the first trading session. The contract saw interest from both domestic and foreign investors.

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