Savouri: City to be transformed by the rise of the renminbi

The Chinese renminbi will appreciate by 60%, the Scandinavian countries will leave the euro to set-up their own currency, VAT rates will vary regionally across the UK, and the City will be transformed by Asian currency trading, the CREFC Europe Spring conference heard in London.

In his keynote speech, economist Dr Savvas Savouri from Toscafund told an audience of property finance professionals that the rise of the Chinese renminbi will be the most dramatic event to affect London in the years ahead.

“China as a state is completely ungeared internationally. At some point China will stop growing through its current account – making things, importing raw materials, adding value to export – and realise actually the way that most economies go through a growth spurt is buy issuing debt, ” said Savouri.

“When that happens, it’ll be transformational. For one, it will require its currency to become more freely traded. In addition, and not unrelated to this it will spawn dozens and dozens and dozens of derivatives that have to be traded and yes, they’ll be traded in Singapore, Hong Kong and Shanghai but those centres in the East need to have a Western hub to provide 24hr trading and that Western hub will be London.”

Savouri also said frustration with the Eurozone will prompt the Scandinavians to set up their own currency.

“And who knows? When you do get a Nordic union, which will happen, the Scots might decide they’re Nordic.”

In terms of the property finance market today, overall sentiment at the conference was positive although Stephen Eighteen, Head of Origination at Aalto Invest, sounded a note of caution: “I think the lessons of previous downturns is that whenever you think things are great then that’s the time to start getting worried. I think we are probably in that situation today.”

Indeed, the current environment was not expected to last. In an audience survey, 81% believed the next property crash would occur between 2016-2020.

The CREFC Europe Spring Conference continues today.