With the support of the Hong Kong Monetary Authority (HKMA) and the People’s Bank of China (PBOC), Shenzhen Central Sub-Branch, the clearing houses in Hong Kong and Shenzhen have begun a trial run of a system linkage between the renminbi Real Time Gross Settlement (RTGS) system in Hong Kong and the Shenzhen Financial Settlement System since 21 January 2013. The linkage allows the extension of the operating hours of cross-border renminbi payment services between Hong Kong and the Mainland from 4:30 p.m. to 10:30 p.m. So far, the arrangement has been operating satisfactorily and smoothly. The PBOC Shenzhen Central Sub-branch and the HKMA agree to expand the promotion of the service and it is anticipated that more banks in Shenzhen will participate in this new arrangement. The further enhancement of the payment and settlement platform will provide more efficient and comprehensive services to cater for the development of renminbi business in Hong Kong.
Time zone difference is the main reason for payments across different continents not being received on the same day. A payment made in the morning of the originating city may only be received at the evening time of the destination city due to time zone difference. This situation is also observed in the offshore renminbi payments in Hong Kong and the overseas countries. In view of this, the operating hours of the renminbi RTGS system in Hong Kong have been extended from 10 hours to 15 hours a day starting from 25 June 2012, with the operating window between 8:30 a.m. and 11:30 p.m., Hong Kong time. This enhancement has effectively extended the operating window to eight and a half hours for our European counterparts (from 9:00 a.m. to 5:30 p.m., European time) and two and a half hours for our US counterparts (from 9:00 a.m. to 11:30 a.m., New York time), which will cater for the increasing demand for renminbi payment and settlement in these regions. As a result, renminbi payments which are originated from the overseas in the morning (European/US time) will be able to reach Hong Kong in the evening (Hong Kong time). This will in turn allow the receiving banks to credit funds into customers’ accounts as soon as practicable. In the first seven months of 2013, the daily average transaction processed during the extended window amounted to RMB4.5 billion, which nearly doubled from the second half of last year’s daily average transaction of RMB2.6 billion before the launch of the new arrangement. We believe that the transaction volume to be processed during the extended window will grow further along with the development of the renminbi business globally and the continuous momentum of renminbi internationalisation.
Despite this, the extended window solely contributed by the extension of operating hours of the Hong Kong renminbi RTGS system can only cater for renminbi remittances which do not involve Mainland counterparts as paying or receiving parties. The settlement of cross-border renminbi remittances involving Mainland counterparts are still subject to the operating hours of the China National Automatic Payment System (CNAPS). As the operating hours of CNAPS end at 5:00 p.m., Hong Kong time, cross-border payment services will be available up to 4:30 p.m. only. Payments which are originated from Europe with final destination to the Mainland can only be settled on the next working day if such payments reach Hong Kong after 4:30 p.m. This will adversely affect the liquidity and interest costs of corporations as well as individuals, thus constraining the improvement of settlement efficiency.
As such, the co-operation between the clearing houses in Hong Kong and Shenzhen and the extension of operating hours of cross-border renminbi remittance services will increase the efficiency of current payment channels between Hong Kong and Shenzhen and further enhance the renminbi payment and settlement platform in Hong Kong. Since the Shenzhen Financial Settlement System operates on a 24/7 basis, the cut-off time for the renminbi RTGS system in Hong Kong to receive payment instructions with destination to the Mainland can be extended by six hours, from 4:30 p.m. to 10:30 p.m. That means payments made in the morning (European/US time) will be able to credit not only to banks in Hong Kong, but also to receiving banks in Shenzhen through the Shenzhen Financial Settlement System in the evening (Hong Kong time) on the same day for onward real-time transmission through the respective bank’s internal network to the customers’ accounts in various provinces and cities on the Mainland; and vice versa.
Currently, there are 57 participating banks in the Shenzhen Financial Settlement System, among which 29 of them are directly and 28 are indirectly linked to its Settlement System, covering the 20 largest banks on the Mainland in terms of total asset size. Shenzhen banks participating in this new arrangement include the China Industrial and Commercial Bank of China, Bank of China, China Construction Bank, China Merchants Bank and Minsheng Bank. It is anticipated that more banks will participate in this new arrangement for cross-border renminbi payments, which will provide more convenience to the 212 participating banks (including 184 foreign banks) of Hong Kong’s renminbi RTGS system to conduct cross-border renminbi remittance services, in turn facilitating the development of cross-border renminbi settlement services.
The history of co-operation between Shenzhen and Hong Kong in payment and settlement can be traced back to as early as 1998. Since then, Hong Kong dollar and US dollar RTGS system linkages and cheque clearing linkages have been established. Currently, over 700 cross-border payment transactions with an aggregate value equivalent to around HK$ 2.1 billion are processed daily between the two places. The extension of the operating hours of cross-border renminbi payment arrangement marks a milestone in the co-operation between Shenzhen and Hong Kong. It will reinforce Hong Kong’s role as an offshore renminbi centre and attract more overseas banks to make use of Hong Kong’s renminbi RTGS system to conduct interbank fund transfers and payments related to renminbi financial products.The extension of the operating hours of cross-border renminbi payment arrangement will further enhance Hong Kong’s renminbi financial infrastructure, financial centres in different time zones could pool their renminbi funds in Hong Kong, and conduct real time renminbi payment with their Mainland and overseas counterparts at any time through Hong Kong’s safe and efficient platform. The implementation of the enhanced arrangement will further facilitate cross-border flow and recycling of renminbi funds, enabling Hong Kong to better serve those in different parts of the world which are interested in using renminbi for trade and investment through its highly efficient and reliable payment and settlement platform. It will also support the development of renminbi business globally. Riding on the successful implementation of the pilot arrangement for cross-border renminbi payment, the HKMA will actively promote the new service to local and overseas banks, corporations and individuals to ensure their understanding of the benefits and operational details, with a long-term aim to promoting the sustainable development of the renminbi business.
As always, the HKMA will continue to co-operate with the relevant authorities and institutions in Shenzhen and Hong Kong to enhance the financial infrastructure in response to the market needs, and reinforce Hong Kong’s role as a renminbi payment and settlement hub to better serve not only Hong Kong, but also the rest of the world.
Deputy Chief Executive
26 August 2013