Chancellor George Osborne has announced moves aimed at making London the main centre for Chinese financial business overseas.
Mr Osborne will loosen regulation to allow the move.
Under an £8bn pilot scheme, London-based investors will be able to apply for a licence to use the Chinese currency to invest directly in Chinese shares and bonds.
Until now, they have had to direct their investments via Hong Kong.
Mr Osborne is also facilitating talks between Chinese banks and the UK banks regulator, the Prudential Regulation Authority, to allow them to establish branches for wholesale activities in London.
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