Good morning ladies and gentlemen,
1. It is my great pleasure to be here today to join you to
celebrate the launch of the Asian Development Bank's first issue of
renminbi bond in Hong Kong.
2. The Asian Development Bank's debut renminbi issue is ground
breaking in two ways. It marks the deepening of the renminbi bond
market by extending the universe of issuers to include the triple-A
rated international financial institutions. It also marks a
significant extension of the tenor of renminbi bonds from two,
three and five years to ten years. This will no doubt help the
development of a benchmark yield curve for offshore renminbi bonds
over time.
3. This bond issue is also launched at an exciting time for all
those who have an interest or a part to play in the development of
the renminbi business in Hong Kong. 2010 would probably mark the
taking-off of renminbi financial activities that would build the
foundation for Hong Kong's development as a renminbi trade
settlement centre, renminbi financing centre and renminbi wealth
management centre. These different dimensions of Hong Kong's
renminbi financial market are mutually reinforcing. I am hopeful
that they would evolve into a virtuous circle, speeding up the
formation of a critical mass of the offshore reniminbi market in
Hong Kong. Let me explain how the interface between these three
important dimensions of the renminbi market may achieve this
desirable outcome.
4. The first dimension is the development of Hong Kong as an
renminbi trade settlement centre. Following the substantial
expansion of the renminbi trade settlement scheme in June 2010,
whereby companies in 20 provinces and cities in Mainland China can
now have the option to settle their current account transactions
with any parts of the world in renminbi, the amount of trade
transactions settled through banks in Hong Kong has increased by
more than eight times, to over 38 billion yuan in August, from an
average of 4.5 billion yuan in the first half of this year. The
potential for significant future increase is tremendous as the
current settlement volume only accounts for a small fraction of the
trade between China (including Hong Kong) and the rest of the
world.
5. The increase in renminbi trade proceeds will help to build up
a liquidity pool to support renminbi financial intermediation
through bank lending and bond issuance. In the other direction, the
deepening of the renminbi bond market will also reinforce the
further expansion of trade settlement. Traders will have more
incentive to settle trade transactions in renminbi if they are
confident that the trade proceeds can be put to good use in
investing in renminbi denominated financial products.
6. The second dimension is the development of Hong Kong as an
renminbi financing centre. Supported by the increasing volume of
trade transactions settled in renminbi, the pool of renminbi
deposits in Hong Kong has grown, from just over 60 billion yuan at
the end of last year, to over 130 billion yuan at the end of
August. While this amount of liquidity is still small, it has
nevertheless been catalytic to renminbi financial intermediation in
Hong Kong.
7. We have seen earlier this year a number of ground breaking
renminbi financing arrangements. These include the 70 billion yuan
loan facility extended by the China Development Bank to Venezuela
to fund oil production related projects; and renminbi fund raising
by the Hopewell Highways Infrastructure and McDonald's in Hong Kong
to finance their projects in the Mainland in the form of foreign
direct investment. These landmark transactions underline the
importance of building a two-way channel to connect Hong Kong's
capability in international financial intermediation with the real
economic activities that are denominated in the renminbi, which up
to this point are still mainly concentrated on the Mainland. These
developments clearly show that the fund raisers have the appetite
to make use of Hong Kong's comprehensive and multi-currency
financial platform to raise renminbi funds to meet their financing
and investment needs. The international financial institutions are
also actively involved in projects on the Mainland. I am sure their
participation in renminbi financing will further energize this
channel of two-way flow and deepen Hong Kong's role as an renminbi
financing centre.
8. The third dimension is the development of Hong Kong as an
renminbi wealth management centre. The revision of the renminbi
Clearing Agreement between the People's Bank of China and the
Clearing Bank in July has removed the restriction on interbank
transfer of renminbi funds, an important hurdle that had previously
limited the development of renminbi wealth management products in
Hong Kong. Financial intermediaries are responding quickly and
proactively to this relaxation with the launch of a wide range of
renminbi denominated financial products. These include renminbi
certificates of deposits, structured deposits, insurance products
and investment funds. The reception of investors has been
phenomenal. The issuance of long-dated triple-A bonds by the Asian
Development Bank will provide further impetus to support the
development of renminbi denominated wealth management products. In
particular, issuers of the very popular renminbi denominated
insurance policies need long-dated renminbi bonds to match the
long-term liability of their policy exposure.
9. All of these encouraging developments underscore the point
that having the right policy framework is one of the key
preconditions for renminbi business in Hong Kong to take off. But
that accounts for only half of the equation. It is equally
important for financial intermediaries, international financial
institutions included, to seize the opportunity and play a
proactive role in reaching out to those who are in demand and
supply of renminbi. The Asian Development Bank has once again
demonstrated its commitment to the development of financial markets
by bringing about this renminbi bond issue today. I would like to
congratulate the Asian Development Bank on the successful launch of
the bond issue, and look forward to many more to come.
10. Thank you.
