Multi-currency cross-border payment arrangements between the Mainland and Hong Kong

The People's Bank of China (PBoC) and the Hong Kong Monetary Authority (HKMA) have signed a Memorandum of Understanding for the establishment of multi-currency cross-border payment arrangements between the Mainland and Hong Kong ("cross-border payment arrangements"). The cross-border payment arrangements will go live on 16 March 2009.

The establishment of the cross-border payment arrangements is an important move jointly taken by the PBoC and the HKMA to strengthen cooperation in the area of financial infrastructure between the two economies. These arrangements will deepen the ongoing promotion of financial cooperation between the Mainland and Hong Kong and mark the introduction of a wide-ranging cross-border payment and settlement mechanism covering multiple currencies.

The scope of cross-border payment arrangements will cover cross-border payment and settlement items of relevant foreign currencies in compliance with the requirements of the rules and regulations on foreign exchange control of the Mainland. Mainland banks using these arrangements to settle cross-border payment instructions shall observe the rules and regulations on foreign exchange control of the Mainland. At their launch, the cross-border payment arrangements will cover four currencies - the Hong Kong dollar, US dollar, euro and British pound. Development of cross-border payment arrangements for other currencies will depend on market demand.

Cross-border payment arrangements for the Hong Kong dollar, US dollar and euro will be implemented by the establishment of linkages between the Hong Kong dollar, US dollar and euro Real Time Gross Settlement (RTGS) systems in the Mainland (i.e. China's Domestic Foreign Currency Payment System) and the respective RTGS systems in Hong Kong through the Mainland Settlement Institutions and their agent banks in Hong Kong. Participating banks on the Mainland and in Hong Kong will be able to issue and receive cross-border payment instructions in these three currencies through the relevant RTGS systems in their respective places. Cross-border payment arrangement for British pound will be implemented by the establishment of a linkage between Mainland's British pound RTGS system through the Mainland Settlement Institution and the network of its agent bank in Hong Kong. Mainland participating banks and Hong Kong banks will be able to issue and receive cross-border payment instructions in British pound through Mainland's RTGS system and the network of the agent bank in Hong Kong respectively. The respective Mainland Settlement Institutions for the Hong Kong dollar, US dollar, euro and British pound are China Construction Bank Corporation, Bank of China Limited, Industrial and Commercial Bank of China Limited and Shanghai Pudong Development Bank Company Limited. They have appointed China Construction Bank Corporation, Hong Kong Branch, Bank of China (Hong Kong) Limited, Industrial and Commercial Bank of China (Asia) Limited and Citibank (Hong Kong) Limited as their respective agent banks in Hong Kong.

The establishment of the cross-border payment arrangements between the Mainland and Hong Kong will provide banks in Asia with a payment mechanism operating in the same time zone, thereby increasing the efficiency of cross-border multi-currency payments and reducing cross-border payment and settlement risks and costs. Under these arrangements, the Mainland and Hong Kong participating banks will benefit from enhanced liquidity efficiency and management as well as increased competitiveness in cross-border payment services. The arrangements represent a key step forward in strengthening the economic and financial ties between the Mainland and Hong Kong.

People's Bank of China
Hong Kong Monetary Authority
12 March 2009