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Hong Kong Looks For RMB Business From Brazilian Firms

by Mary Swire, Lowtax.net, Hong Kong
07 October, 2014

Hong Kong is to welcome increased business from Brazilian corporations and financial institutions under its offshore renminbi (RMB) platform, as these businesses' economic activities with China expand, Permanent Secretary for Financial Services and the Treasury Au King-chi said on October 2 in Rio de Janeiro.

At a roadshow luncheon on "Hong Kong as a global offshore RMB business hub and the opportunities for Latin America," Au emphasized the role of Hong Kong in RMB internationalization, and how the increasing use of RMB in international trade and finance would offer new opportunities for Brazilian corporations and financial institutions.

She said: "With the full support from the Chinese Central Government, through cross-border trade, direct investments, and portfolio investments, Hong Kong is linking up the offshore and onshore RMB markets, and promoting the healthy circulation of RMB funds. Mainland China is Brazil's largest trading partner, accounting for 16 percent of its imports and 19 percent of its exports. The use of RMB as a trade settlement currency will open up more business opportunities for both countries."

"Hong Kong is the global hub for trade settlement in RMB, serving both local and overseas banks and corporations," Au continued. "In the first seven months of this year, the RMB trade settlement handled by banks in Hong Kong amounted to RMB3.4 trillion (USD554bn), accounting for 90 percent of the external trade of Mainland China being settled in RMB."

She said Hong Kong would "welcome Brazilian corporations to raise RMB through listing or issuing bonds in Hong Kong for financing investments in Mainland China. This will lower Brazilian fund-raising costs and ensure greater flexibility in managing RMB funds raised in the offshore market."

As at the end of August 2014, there were 443 bond issuances in Hong Kong worth RMB374bn. Two corporations from Brazil have already issued RMB bonds in Hong Kong.

Au confirmed that Hong Kong's Government would "spare no efforts to create a user-friendly environment for market participants. For example, we have modernized our companies law to facilitate business and enhance corporate governance."

"In addition, we shall introduce fiscal incentives, such as providing profits tax exemption to offshore private equity funds and remove stamp duty on exchange-traded funds (ETFs)," she said.

The current profits tax exemption for offshore funds will be extended to private equity funds, so as to cover transactions in private companies which are incorporated or registered outside Hong Kong and funds that do not hold any Hong Kong property nor carry out any business in Hong Kong.

Furthermore, while the stamp duty concession in 2010 was extended to cover ETFs that track indices comprising not more than 40 percent of Hong Kong stocks, the Government is planning to waive the duty for the trading of all ETFs to lower transaction costs and further promoting the growth of the market.

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