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HKMA Removes RMB Conversion Limit

by Mary Swire, Lowtax.net, Hong Kong
14 November, 2014

Norman Chan, the Chief Executive of the Hong Kong Monetary Authority (HKMA), has announced that the RMB20,000 (USD3,260) daily renminbi (RMB) conversion limit for Hong Kong residents will be removed to coincide with the launch of the Shanghai-Hong Kong Stock Connect (SHKSC).

Chan said that the HKMA has had many rounds of discussions with the banking industry and Mainland authorities on relaxing the restrictions, and it considers that the best option is for RMB conversions by Hong Kong residents to be done now in the offshore market instead of the onshore market.

As a result, banks will square their positions arising from RMB conversions conducted with Hong Kong residents in the offshore market instead of the onshore market, and the present conversion and other relevant restrictions for onshore conversion will no longer be applicable, with effect from November 17, when SHKSC is to launch.

He added that, "With the size of the offshore RMB liquidity pool in Hong Kong exceeding RMB1 trillion, and considering the scale and depth of the RMB foreign exchange market, the HKMA does not foresee any problem for banks to square their positions for Hong Kong residents in the offshore market."

He said that after the removal of the conversion limit, it will become more convenient for Hong Kong residents to participate in the SHKSC, which links trading on the stock exchanges in Shanghai and Hong Kong, as well as in other RMB financial transactions.

The measure, he said: "Will facilitate the launch of RMB investment products by financial institutions in Hong Kong, and raise the position of Hong Kong as an offshore RMB business center."

Hong Kong's Financial Secretary, John C Tsang, welcomed the move by the HKMA and noted that it "will help facilitate the development of even more RMB investment and wealth management products. It will add further to our unparalleled edge as the world's premium offshore RMB hub and help propel the development of offshore RMB business in Hong Kong."

He also thanked the Chinese Government for its support in this matter, and noted that Hong Kong "will continue to serve as both the laboratory for new reform measures and the firewall for shielding the Mainland financial market from volatility in the international arena."

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