October 2, 2024

DealBook: London Wants to Tap Chinese Currency Market

The London offices of financial firms such as Swiss Re and Lloyd’s of London.Chris Ratcliffe/Bloomberg NewsThe London financial district.

LONDON — Britain plans to turn London into a major foreign exchange trading center for the Chinese renminbi to benefit from faster growth in Asia while strengthening the city’s position as a financial center in the wake of the banking crisis.

George Osborne, the chancellor of the Exchequer, said during a visit to Hong Kong on Monday that he was working with Chinese and British banks to establish London as a new hub for the renminbi market.

“London is perfectly placed to act as a gateway for Asian banking and investment in Europe, and a bridge to the United States,” Mr. Osborne said in a speech to the Asian Financial Forum in Hong Kong. “This is not just an accident of time zone, or our language, although both are important. It reflects London’s strength in product development, its regulatory structure, and the depth, breadth and international reach of its financial markets.”

The pledge comes as Britain is increasingly feeling the effects of an economic slowdown across Europe, and some British banks have threatened to move their headquarters abroad in light of stricter financial regulation.

The government hopes that steps toward creating a Chinese currency hub in London will help strengthen the city’s role as a financial center vis-à-vis New York and Hong Kong, while helping Britain attract Chinese investments in other sectors, including infrastructure.

Mr. Osborne said London was already the largest foreign exchange market in the world, adding that the growing use of the renminbi would “bring substantial benefit to Chinese economic development and the wider world economy.”

The Chinese currency’s share of the global foreign exchange market was 0.9 percent in June last year, Mr. Osborne said. That compares with China’s share in worldwide trade of 11 percent in 2010. “It is clear that there is scope for substantial expansion of the renminbi market in the coming years,” Mr. Osborne said.

Sébastien Galy, a foreign exchange strategist at Société Générale in London, agreed with Mr. Osborne that London’s geographical position allowed it to play a role in the expansion of the currency market, but he said it would take time for that market to grow to a sizable volume.

“It could take decades to achieve that, which doesn’t mean that the renminbi wouldn’t increase in trading volumes in the meantime,” Mr. Galy said. “There are regional issues, their markets are not developed enough yet and also you need a floating currency.”

In a first step to expand the currency trading, Hong Kong has decided to expand the operating hours of its renminbi settlement system by five hours. China has been using its currency more in international trade to reduce its reliance on the dollar.

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On the Road: A Dark Mood Surrounds Corporate Jet Makers

AT 8 in the morning, you don’t usually see so many men and women in dark suits unless it’s a memorial service. Especially here, in sunny Las Vegas.

But there they were, 25,000 people representing the business aviation industry along with the extensive worldwide trade media gathered for the annual National Business Aviation Association convention, looking as grave as an assembly of undertakers who had just checked their 401(k)s. Their attire was basically just the conservative business dress suggested by convention organizers. But still, the mood on opening day seemed as dark as the apparel.

Bill Boisture, the chief executive of Hawker Beechcraft, set a dour tone early Sunday morning when he lamented the “inconsistencies” in the market outlook. He also denounced the Obama administration and some Democrats in Congress for being “nothing short of irresponsible” because they had uttered the words “corporate jet” with populist disdain, while calling for measures like reducing certain tax benefits for using private planes.

The industry correctly points out that it accounts for a large number of domestic jobs — 120,000 in manufacturing, down 20,000 since 2008 — and a healthy chunk of the American export trade. But while he railed against Washington, Mr. Boisture was also thrown a bit on the defensive at a news conference when it was noted that Hawker had closed one of its Kansas plants and outsourced jobs abroad. “We felt American industry was playing on an unlevel playing field,” he responded.

Continuing the mood, Scott Ernest, the chief executive of Cessna Aircraft, said, “The market is still very spotty” for business aviation. Cessna, a big player in the light to midsize business jet market, was hard-hit by the recession and is hoping that its newest model, the Citation M2, a light jet, will help turn things around.

The industry, still dominated by American manufacturers, will sell about $230 billion in new business jets in the next 10 years, according to a forecast by Honeywell Aerospace released at the convention. This year, Honeywell said, manufacturers will deliver 600 to 650 new business jets, compared with 732 last year, and down sharply from 1,139 in the industry’s peak year, 2008.

Still, as in many other things during this economic slump, the top luxury niche is doing well. Driven by sharply increased foreign sales, particularly in Asia, Brazil and the Middle East, and the growing need for more long-range international travel by domestic companies, the market for the biggest, most expensive business jets has remained strong.

In the last few years, large cabin, ultra-long-range business jets have been selling robustly, and will represent about 25 percent of projected sales through 2011, Honeywell said. For some companies with far-flung business, said Rob Wilson, the head of Honeywell’s business and general aviation unit, a large cabin long-range plane allows a group of managers to travel efficiently and productively.

“The last trip I took on a large-cabin jet was over to India — two days in India, then a day in Singapore, two days in China and back home, all in five days,” he said in an interview.

Now, whenever I write that corporate aircraft, including charters, can make sense in many business situations, I get furious e-mails accusing me of going to the dark side. So let me hasten to say that I’m leaving Las Vegas in a middle seat on a commercial plane, in a row back by the restrooms, for a trip to New York that will take 12 hours, with connections.

But you should see some of the magnificent corporate jets on display here, on 630,000 square feet of space at Henderson Executive Airport, where conventiongoers are able to wander around the planes and even through them. There are 90 planes, but the star is the new Gulfstream G650, which can fly close to the speed of sound, has a range of 7,000 miles, and can fly as high as 51,000 feet. “Think of it as having the sky to yourself,” Gulfstream ads say.

Gulfstream, which has added 1,300 jobs this year, has orders for that plane that extend into 2017, and announced at the convention that it expected to deliver the first 10 or 12 next year. The price tag for each one is $64.5 million. Curiosity and demand are such that to look inside the G650 model here requires a reservation.

Not on display, but definitely on the market, are even grander airplanes like the so-called V.I.P. models of Boeing’s commercial planes. Those planes are not included in the Honeywell forecast, which looked only at production-model business jets (not converted commercial airliners). The Boeing V.I.P. line includes a private version of the new 787 Dreamliner ($178.2 million, plus cabin outfitting starting at $80 million). Or how about your own private 747? Boeing can put you in one for about $299.5 million. (Cabin outfitting starts at $140 million).

E-mail: jsharkey@nytimes.com

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