On June 22, banking leaders in the U.K. and China signed a deal intended to open a torrent of new London trade in the RMB, the Chinese currency whose global importance is rising nearly as fast as China's. It was, the BBC said, a 200-billion yuan ($35.1-billion) three-year contract "likely to boost trade between the U.K. and China in the yuan."
The deal involved establishing a direct currency swap line between the Bank of England and the People's Bank of China, a channel for a gusher of yuan – the other name for the RMB – to pour into England if Canary Wharf got short.
But currency swap lines are funny things. They get announced to major fanfare, and China has been on a roll with them, with signings in the EU, Australia and Japan. They are objects of lust: Both Toronto and Vancouver are vying to become Canada's centres for RMB settlement, and they want a currency swap line to make it happen.
But if London is any measure, the swap lines themselves don't do much of anything at all.
"My guess is, it's never been used," said Mark Boleat, policy chairman at the City of London Corp., which played a leading role in getting the line in the first place.
In fact, he said in an interview, "if it was used every day, I think the feeling would be there's something wrong in the market."
That's not to say there's no value in it. Having such a line provides insurance. A bank might be leery to conduct a big currency transaction if it's not sure it has sufficient yuan on-hand. It need not worry if it can turn to the swap line.
But there's a big difference between announcing a new swap line and establishing a thriving RMB trade. In London, after all, RMB import financing nearly tripled between the first half of 2012 and the first half of 2013, before the swap line deal was formally signed.
Mr. Boleat sees the swap line as a "symbol, something that you can announce." But he said, sometimes it gets "undue publicity. So the notion that you can actually create an RMB market by having two things called a swap line and a settlement bank? No. They facilitate a market. But what you need is transactions."
All of which has obvious implications for Canada, where the RMB trade today is far less than in London. Those who want to see Toronto or Vancouver become a settlement hub may need to look to their clients, rather than Ottawa (which would have to negotiate a swap line agreement).
Mr. Boleat said it can "only be beneficial" to the broader RMB trade if, for example, Toronto were to establish itself as a settlement centre. But, he said, "you're not going to build an international financial centre by building some buildings and sticking a sign on them."
London, meanwhile, is racing forward to other goals as it seeks to attract more RMB trade. Some retailers are beginning to accept yuan from Chinese tourists. The Bank of England signed a clearing agreement with Beijing March 31, and said it would name a London clearing bank for the yuan, a step designed to speed RMB-denominated transactions in London, "in due course."
"Ultimately, what we all want to see is RMB being used more and more as a currency of choice in the world," Chancellor of the Exchequer George Osborne said.