Meeting of the Financial Secretary and the Chief Executive of Hong Kong Monetary Authority with People's Bank of China

The Financial Secretary, Mr Henry Tang, and the Chief Executive of Hong Kong Monetary Authority (HKMA), Mr Joseph Yam, met with Zhou Xiaochuan, Governor of the People's Bank of China (PBoC) today (16 January) in Beijing. They discussed the new category of renminbi business in Hong Kong, that is the issuance by financial institutions on the Mainland of renminbi-denominated financial bonds in Hong Kong, and issues raised by the Chief Executive Donald Tsang during his earlier visit to Beijing on enhancing financial co-operation.

The meeting discussed the Mainland administrative arrangements, which will be issued shortly, for applications by financial institutions on the Mainland to issue renminbi bonds in Hong Kong. The sale and distribution of the renminbi bonds, trading, settlement and custody and pricing in Hong Kong will follow the normal Hong Kong market practices. The new business will become operational once the Hong Kong renminbi Real Time Gross Settlement (RTGS) system is established, related administrative arrangements on the Mainland are introduced and relevant clearing agreements are revised. The two sides also agreed to explore and promote further expansion of renminbi business in Hong Kong.

On the same day, a supplementary memorandum of co-operation was signed by Governor Zhou and Mr Yam, expanding the relevant co-operative arrangements to cover the new category of renminbi business. The PBoC has separately issued today an announcement that having obtained approval by the State Council, it will expand the scope of clearing and position-squaring arrangements provided for renminbi business conducted by Hong Kong banks.

Mr Tang presented detailed ideas and specific proposals on enhancing financial co-operation between Hong Kong and the Mainland. These include establishing a complementary, co-operative and interactive relationship between the two financial systems, and enhancing the status of Hong Kong as the country's international financial centre, to make better use of Hong Kong as a pulling force for the development of financial centres on the Mainland.

Mr Tang, said, "Under the framework of 'One Country, Two Systems', China has two different financial systems in Hong Kong and the Mainland, and this is a unique advantage. As the country's international financial centre, it is necessary for Hong Kong to act according to and be involved in the financial development of the country, and contribute to sustaining the country's fast economic growth. The development of renminbi business in Hong Kong is an important aspect of this."

Mr Yam said, "An important part of financial co-operation between Hong Kong and the Mainland is to explore how to progressively link the financial markets of the two places, moving eventually towards the free movement of financial institutions, financial instruments and funds, so as to increase the scope, efficiency and liquidity of the financial markets of Hong Kong and the Mainland. Separately, the HKMA will complete the work of establishing the renminbi RTGS system and the related infrastructure as soon as possible to allow the new business to be launched quickly."

For further enquiries, please contact:
Ying-ying Cheng, Manager (Press), at 2878 1687 or
Hing-fung Wong, Officer (Press), at 2878 1802

Hong Kong Monetary Authority
16 January 2007