Hong Kong launches pilot scheme to boost renminbi growth

Hong Kong to capitalize focus of the global economic growth in Asia in the coming five years.

Secretary for Financial Services & the Treasury Prof KC Chan says the Mainland's pilot scheme for the settlement of overseas direct investments in renminbi will facilitate Hong Kong's offshore renminbi market development.

Under the scheme, Mainland enterprises, upon approval by Mainland authorities, can conduct direct investments overseas using renminbi.

Speaking on a radio talk show on Saturday, Prof Chan said the move will further enhance the circulation of renminbi funds overseas, and people will need to find an offshore market to conduct trading, lending activities and investment in renminbi.

Since Hong Kong has a sound renminbi clearing and settlement system, part of the overseas renminbi funds will stay in Hong Kong, increasing renminbi deposits in the city. This will allow enterprises to borrow money from the enlarged capital pool in Hong Kong, enhancing the city's financial market development.

Prof Chan said the upcoming Asian Financial Forum will be held in Hong Kong next week and participants will discuss renminbi internationalisation and financial management opportunities and challenges in Asia, according to a government report.

Noting internationalising the country's currency needs an offshore market and a local market, he said Hong Kong and Shanghai have different roles to play and both are equally important to the country's financial and economic development.

As the speed of the economic rebound in European countries and the US is relatively slow, the focus of the global economic growth in the coming five years will be in Asia. Prof Chan said Hong Kong should grasp the opportunities to grow as investors' first choice for asset management.

The second round of quantitative easing in the US has caused low interest-rates and a capital overflow, inviting more speculation activities in the world, he said. The secretary urged investors to be cautious and prudent as the low interest-rate environment will change at any time.