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Hong Kong Playing Key Role In RMB Liberalization

by Mary Swire, Lowtax.net, Hong Kong
25 May, 2015

Hong Kong's Secretary for Financial Services and the Treasury, K C Chan, believes that there are tremendous opportunities ahead for Hong Kong's financial center as China continues to liberalize its currency, the renminbi (RMB).

In remarks at a seminar held by the London Business School, Chan observed that Hong Kong has already been playing a "key role" in the RMB liberalization process, noting that the offshore RMB market was effectively born in Hong Kong in 2003.

"The combined value of deposits and certificates of deposits in Hong Kong is about RMB1.1 trillion (USD180bn) at the end of March," Chan said, adding that: "Offshore RMB bonds, dubbed 'dim sum' bonds, [were] first issued here in 2007. At the end of March, RMB614bn was raised through 498 'dim sum' issues."

According to Chan, the RMB is currently the fifth-most-used payment currency in the world. About RMB6.3 trillion, or 95 percent, of mainland China's total RMB trade was settled by Hong Kong banks.

"We literally work around the clock to help RMB users settle their trades," Chan explained. "Our RMB real-time gross settlement system operates 20.5 hours a day to cover our European and American partners."

Chan told the gathering that Hong Kong is currently pushing for the use of the RMB as an investment currency.

"Launched in 2011, the RMB Qualified Foreign Institutional Investor (RQFII) scheme opened the Mainland equity and bond markets to offshore RMB investors," he said. "At the end of January, we had 84 RQFII funds managing RMB72bn. Along with the 'dim sum' bonds, these funds are opened to investors from all over the world."

In November 2014, the RMB20,000 daily RMB conversion limit for Hong Kong residents was removed to coincide with the launch of the Shanghai-Hong Kong Stock Connect scheme. a mutual market access program that allows Mainland investors to trade stocks listed on the Stock Exchange of Hong Kong (SEHK) directly through the Shanghai Stock Exchange (SSE) – the Southbound Trading Link. At the same time, it also allows Hong Kong and overseas investors to trade stocks listed on the SSE directly through the SEHK – Northbound Trading Link.

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