London is to become the first international hub for trade in China's yuan.

Chancellor George Osborne made the announcement on Monday 16 January from Hong Kong, where he has been finalising the plans which were initiated last summer and which bankers say could bring billions of pounds to the UK.

'London is perfectly placed to act as a gateway for Asian banking and investment in Europe,' Osborne said.

He described the City as the world's largest centre for foreign exchange and said it was 'uniquely placed to assist in the development of this exciting market'.

According to Treasury officials, the new partnership with Hong Kong puts London in pole position to be the major centre for trading the Chinese currency outside China and Hong Kong.

Following the relaxation of strict state controls, the yuan is set to become a major globally-traded currency, in keeping with China's status as the world's second-biggest economy.

The impact, according to Mike McCudden, head of retail derivatives at our sister website Interactive Investor, will mean London institutions, which already account for 30 per cent of yuan trading outwith China, will see trading hours increased.

'Exports to China are increasing exponentially and with ongoing economic strife affecting the eurozone and the US, the timing couldn't be better for Hong Kong in attempting to position the yuan as the international currency of choice over the greenback and euro. The City will happily lap up the business,' he added.

In an article for the Daily Telegraph, the chancellor said: 'It is no coincidence that my first international visit in 2012 is to Asia. While the European economy is struggling, Asia is growing at a remarkable pace. This presents huge opportunities for British businesses to trade and invest, and I'm determined that we get out there and seize them.'

He added that his visit this week to Hong Kong, China and Japan will carry a simple message: 'Britain is open for business.'

'It is precisely as Asian economies become richer that hundreds of millions of people will want to buy the things that British companies can sell them,' declared Osborne.

'They will buy modern medicines and branded goods from pharmaceutical firms such as AstraZeneca and GlaxoSmithKline. They will need insurance, banking, and accountancy services from companies such as HSBC, Prudential and Standard Chartered.

'And they will visit Britain as tourists, carried on Airbus wings and Rolls-Royce engines, joining us in celebrating the London Olympics and the Queen's Diamond Jubilee.'

This was written for our sister website, Interactive Investor