The Bank of England and the People's Bank of China (PBC) are to sign an agreement on renminbi clearing and settlement in London on March 31. A designated clearing bank will be named "soon," the UK Treasury said on March 26.

The change will allow investors to cut the risk from making overseas payments in the Chinese currency. It also burnishes London's position as the global center for foreign exchange trading as China's rise shifts international financial flows.

Historically, economic links between China and Europe have been centered on trade, but as China's wealth grows, and its authorities move to liberalize currency and capital markets, financial centers in Europe are targeting investment. The UK is determined to defend its role as the main offshore renminbi trading center outside Asia.