HSBC China is taking several steps to encourage its clients to use the renminbi for both trade and investment overseas, as China is gradually relaxing the controls on renminbi, he says.

China's push to internationalize its currency started in 2008, when the global financial crisis demonstrated the danger of over-reliance on the US dollar. Since then, Beijing has begun to encourage the use of its currency in international trade, swap arrangements among central banks, and bank deposits and bond issuances in Hong Kong.

Trade in offshore renminbi has subsequently boomed. Increasing Chinese exports have also led to a surge in demand for renminbi outside China as Chinese exporters increasingly expect to be paid in their own currency to eliminate exchange risks.

In an HSBC survey of 1,300 companies in 18 Chinese cities in 2011, 78 percent of the respondents who had not yet started using renminbi to settle cross-border trade had plans to do so.

"Our clients around the world are fascinated by this theme, in all the countries we operate. They want to hear our views on that, and they want to see us active in that space," Davies says.

To keep clients informed of the latest regulatory changes, Davies' team produces research reports regularly and sends them to clients. His team also hosts regular road shows and client meetings to explain recent developments.

"This is moving beyond being a new topic, especially for the more sophisticated customers. It's important for us to be topical," Davies says.

In recent years, HSBC has pioneered the development of some renminbi products and services internationally. For example, HSBC issued the first renminbi bond in London in April, and HSBC Hong Kong carried out a renminbi repo with UBS AG in London in December last year.

But at the same time, HSBC is also facing strong competition from many Chinese banks increasingly expanding into Europe, as well as European banks hoping to attract Chinese investment.

One example is the Royal Bank of Scotland, which established a dedicated China desk in London last year, to assist Chinese companies wishing to expand internationally as well as helping UK and European companies do more business with China.

Janet Ming, who heads the bank's China desk, told Euromoney last year that RBS offers customers a variety of services including cash management, transaction banking, foreign exchange and fixed income.

Meanwhile, many Chinese banks are also expanding overseas, often to serve their existing customers who are expanding abroad.

In London, the earliest Chinese bank was the Bank of China, which opened an agency office in November 1929, which was upgraded into a branch in 1946. China Construction Bank opened a subsidiary in London in 2009. Last December, it became the first Chinese bank to issue a renminbi-denominated bond in London, raising 2 billion yuan (25 million euros).

In 2012, Agricultural Bank of China opened a subsidiary in London, and the Shenzhen-based China Merchants Bank set up a representative office in 2009. The Industrial and Commercial Bank of China set up a representative office in London in 1995, which was later upgraded to a subsidiary.

"Our strategy is to let our customers see us as a local bank, instead of being a Chinese one," Xu Jinlei, former general manager of ICBC London told China Daily in a recent interview.

Xu said more than 75 percent of employees at ICBC London are local employees who can easily interpret the British business environment for the bank's Chinese clients.

Davies says HSBC is also up to the challenge. "It's a big banking market and there will be a large number of players.

"The advantage of HSBC is that our resources are distributed around the world evenly rather than having one central hub, so we can pull resources together seamlessly to help clients."

Contact the writers through cecily.liu@chinadaily.com.cn

(China Daily 05/17/2013 page19)