Mr Norman T. L. Chan, the Chief Executive of the Hong Kong Monetary Authority (HKMA), held a briefing today (Thursday) on the latest developments of Renminbi (RMB) business in Hong Kong.
Mr Norman Chan said, "With the strong support from the Central Government and the relevant Mainland authorities, the development of RMB business in Hong Kong has been encouraging this year. Significant growth and progress have been seen in various areas, including cross-border trade settlement, deposits, bond issuance and the introduction of financial products in the second half of this year."
At the end of November, the total amount of RMB deposits in Hong Kong reached RMB 279.6 billion yuan, representing an increase of RMB 62.5 billion yuan (+29%) and RMB 216.9 billion yuan (+346%) from the end of October this year and the end of last year respectively. The amount of RMB payments to Hong Kong under the RMB trade settlement scheme is increasing steadily. This means the pool of RMB funds in Hong Kong is attaining a reasonable size and can meet the demand for RMB from corporates locally. The HKMA, following discussions with the People's Bank of China (PBoC), considered that there can be certain refinements to the arrangement for conversions of RMB conducted by Participating Banks with their customers for RMB cross-border trade settlement transactions:
|(1)||Participating authorized institutions (AIs) are eligible to square their positions with the Clearing Bank when there is a shortfall of RMB arising from conversions with customers for cross-border trade settlement transactions. In other words, Participating AIs should first utilise the RMB trade proceeds purchased from their customers to satisfy requests for RMB conversions for trade settlement transactions before purchasing RMB through the Clearing Bank in the China Foreign Exchange Trading System in Shanghai.|
|(2)||Participating AIs can only purchase RMB through the Clearing Bank in Shanghai for their customers in relation to trade transactions due for payments to the Mainland within three months. It is estimated that the demand for RMB conversion in Shanghai would be within RMB 4 billion yuan in the first quarter of 2011. The volume of conversion will be assessed after the first quarter taking into consideration the actual circumstances.|
|(3)||In order to maintain a stable supply of RMB, the HKMA will, as a standing arrangement, provide RMB funds of RMB 20 billion yuan through its currency swap arrangement with the PBoC, for cross-border RMB trade settlements.|
|(4)||Given that the convertibility of RMB is restricted at present, we will require Participating AIs to limit their RMB net open positions (whether net long or net short) to 10% of their RMB assets or liabilities.|
In addition, the HKMA and PBoC have discussed about the issue of credit exposure of the Participating AIs to the Clearing Bank. It is considered that this could in principle be resolved by the Participating AIs establishing custodian accounts with the Clearing Bank. The HKMA, the PBoC, the Clearing Bank and the Participating AIs will further discuss the details of such an arrangement including the related legal documents and operational procedures. It is hoped that the arrangement can be implemented as soon as early next year.
With regard to the Exchange Fund's investment in RMB assets, the HKMA's eligibility to invest in the interbank bond market on the Mainland has been approved by the PBoC. The HKMA is working closely with the PBoC on the implementation arrangements.
Mr Norman Chan said, "2011 will be a crucial year for the development of offshore RMB business in Hong Kong. We have made very good progress this year. Along this positive trend, and with the number of Mainland enterprises eligible for the cross-border RMB trade settlement scheme recently been substantially increased to 67,000 and the refinements that we are going to introduce, I am confident that the offshore RMB market in Hong Kong will continue to develop progressively in the coming year, both in terms of the depth and breadth of the market and product development."
For media enquiries, please contact:
Peggy Lo, Manager (Communications), at 2878 1687 or
Yokee Wong, Manager (Communications), at 2878 1213
Hong Kong Monetary Authority
23 December 2010