In January the Rt. Hon. George Osborne (UK Chancellor of the Exchequer) and Mr Norman Chan (Chief Executive of the Hong Kong Monetary Authority) announced the establishment of a private-sector led Hong Kong - London Forum (“Forum”) to promote closer collaboration between Hong Kong and London in support of the wider international use of the renminbi (RMB). The Forum convened for its first meeting today (Tuesday) in Hong Kong.
The meeting was attended by senior representatives from the Hong Kong and London offices of Bank of China, Barclays, Deutsche Bank, HSBC, JP Morgan, RBS and Standard Chartered. The Hong Kong Monetary Authority (HKMA) and UK Treasury acted as facilitators.
The Forum participants reviewed recent developments in international RMB business in both financial centres and noted the growing synergies between them. They discussed the opportunities for the private sectors in Hong Kong and London arising from the wider use of the RMB for business and financial transactions. This reflects a series of policy liberalisation measures enacted by the Mainland Chinese authorities supporting use of RMB for trade settlement, direct investment and portfolio investment.
The Forum participants committed to further close collaboration, among themselves and with other practitioners and market enablers, with the aim of bringing mutual benefits in the development of international RMB business in the two financial centres.
They agreed to take action in the following areas:
1. Supply of Liquidity
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To further enhance support for corporate customers wishing to settle their two-way trade with Mainland China in RMB. The participants noted that RMB trade settlement activities have been generating a significant flow of RMB funds to the international market, and continued expansion in this area of business will provide an important impetus for the further development of the pool of RMB liquidity in Hong Kong and London.
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To increase, through collective and individual efforts, the range of individuals, businesses and financial institutions that are aware of the opportunities in RMB, and are set up to undertake RMB business, particularly in time zones outside Asia. Participants agreed to organise a comprehensive RMB marketing initiative in the run up to the next meeting of the Forum.
2. Payments and Settlements
- To take fuller advantage of the extended operating hours of the RMB Real Time Gross Settlement system in Hong Kong (from 08:30 to 23:30 Hong Kong time) and expand cross-market interbank funding activities between Hong Kong and London. This will help enhance the liquidity of the offshore RMB market and the flows of RMB funds between Hong Kong, London and other markets around the world, helping to ensure a single integrated pool of liquidity is maintained. In this regard, participants also welcomed the new cross-border collateral management arrangement being developed by Central Moneymarkets Unit of the HKMA, JP Morgan and Euroclear, to be implemented by end-June 2012. This will serve as useful infrastructure supporting, among others, RMB repo transactions involving a wider choice of international securities.
- To monitor closely the evolution of foreign exchange settlement risk in the international RMB market. Participants did not believe this represented an immediate constraint on the market's development. However, given the long lead times in developing effective mitigation strategies, they agreed to explore now how global best practice in managing FX settlement risk could best be applied.
3. Products and Market Services
- To provide direct foreign exchange quotes of RMB against GBP, Euro, and other currencies which will help facilitate the use of RMB by corporates and investors in the UK and Europe for trade settlement, financing and wealth management activities;
- To further improve the scope, efficiency and transparency of the offshore RMB market as a whole. In particular, participants agreed to develop, with the help of market enablers and trade bodies, improved pricing benchmarks and bond indices; to work with inter dealer brokers to boost the liquidity of existing and new products; and to engage with the relevant trade bodies to ensure consistent global standards for RMB product documentation.
Following this meeting of the Forum, two specialist workshops, on cross-border collateral management for RMB funding activities and on development of the offshore RMB bond market, will be held tomorrow.
The next meeting of the Forum will be convened in London in Autumn 2012.
