'One country, two currencies' boosts economic integration
The central government's decision to allow Hong Kong banks to accept business in renminbi will further enhance the visibility of the currency in daily life here.
For many Hong Kong people who own a second home in the Pearl River Delta and who travel to the mainland frequently for business and leisure, opening a yuan account and applying for another credit card for renminbi transactions will provide much convenience.
Although the renminbi has long been circulating here widely, albeit outside the banking system, the policy change will formally usher in an era of two currencies in Hong Kong.
The circulation of two currencies in the city reflects subtle changes in cross-border contacts under the policy of 'one country, two systems' since Hong Kong became a special administrative region of China in 1997.
That the Hong Kong dollar is allowed to continue to circulate after the handover is an important manifestation of the central government's pledge to keep Hong Kong's uniqueness under Chinese sovereignty.
So far, only the slowly evolving designs of Hong Kong banknotes have reflected Hong Kong's change of political status from being a British colony to being part of China.
But there is no question that the renminbi initiative is welcome.
At a time when economic confidence remains fragile, it will give another boost to the feel-good sentiments among Hong Kong people.
Even though the benefits to the local banking sector from the clearing arrangements may be insubstantial in the near term, the move will be welcomed as part of an ongoing commitment by the central government to revive Hong Kong's economic vitality.
This will prove to be strategically important as Hong Kong undergoes a painful process of economic transformation towards a service economy, in which banking and finance form an integral component.
A freer flow of renminbi across the border with the mainland will also facilitate the flow of people, particularly tourists, between the two places.
Though run on a trial basis with a number of restrictions, the decision to allow Hong Kong banks to conduct personal renminbi business is indicative of an accelerated trend of economic integration with the mainland.
