Hong Kong to boost Renminbi's internationalisation

Hong Kong was an important constituent of China’s financial market, and the Mainland could leverage Hong Kong’s effective financial resource allocation platform to facilitate the renminbi’s internationalisation, Financial Secretary John Tsang said.

This was the key message in his opening address at a seminar on implementation of the Central Government’s measures to support Hong Kong’s financial development on Wednesday.

“Funds may ‘come in’ and ‘go out’ in an orderly manner through the onshore and offshore fund circulation mechanism. An active renminbi liquidity is conducive to the introduction of more renminbi products in Hong Kong and would help to build a multi-layer financial market in China during the 12th five-year period. This would achieve the goal of promoting cross-border use of renminbi while safeguarding financial security of the nation,” Mr Tsang said.

Renminbi direct investment and renminbi trade settlement measures had been implemented successfully, he added.

On October 14, the Ministry of Commerce and People’s Bank of China promulgated a notice on cross-border renminbi foreign direct investment and related renminbi foreign direct investment settlement rules, Mr Tsang said, adding wider use of renminbi for direct investment would lower the risk of currency exchange for Hong Kong enterprises.

He said the notice clearly set out the vetting criteria. This enables enterprises to gain greater confidence in issuing bonds in Hong Kong, enhances international investors’ interest in buying renminbi bonds in Hong Kong, and attracts more enterprises to make use of the renminbi fund-raising platform here for financing direct investment on the Mainland.

RMB business set for expansion
Hong Kong’s offshore renminbi business will be expanded, he added.

“The introduction of different renminbi investment tools in the Hong Kong market will not only attract more funds to Hong Kong, but also increase the circulation of renminbi between the onshore and offshore markets. Thus, the breadth and depth of the markets for Hong Kong renminbi products will be enhanced. More innovative renminbi products will be made available, thereby benefitting investors, financial institutions and the market as a whole,” the Financial Secretary said, in a government report.

Speaking at a panel discussion, Secretary for Financial Services & the Treasury Prof KC Chan said the notice and the rules were testament to the implementation of the Central Government’s measures to support Hong Kong’s financial development. They showed the Central Government’s backing for Hong Kong’s position as an international financial centre.

“On the national level, renminbi direct investment would promote cross-border use of the currency by serving the real economy. To Hong Kong, the measure provides more and better avenues for the growing renminbi liquidity pool. It also paves the way for the development of renminbi bond and securities markets in the city.

“For enterprises, direct investment on the Mainland in renminbi would not only lower the cost for and the risk of currency exchange, but also provide diversified channels for raising funds.

“The availability of diversified fund-raising channels, including bonds and shares, would enable enterprises to raise capital based on their needs for investments on the Mainland, especially against the background of the current global economy and volatility of the markets. The direct investment measure would offer various fund-raising channels and ensure long-term and stable sources of capital for investments on the Mainland.”

Prof Chan added in the first 11 months this year, multinational enterprises and international financial institutions issued 78 renminbi bond issuances with a total value of RMB99 billion.