Green light for yuan accounts
Agreement allows banks to offer renminbi services, loosening money flow across border
Local banks received the green light to conduct yuan business yesterday in a landmark move that will spur cross-border economic activity and more closely knit Hong Kong's financial system with that of the mainland.
Under the scheme, approved by the State Council and announced here by the chief executive, banks in Hong Kong will be able to provide yuan deposit, remittance, exchange and credit card services.
'[This agreement] marks an important step forward for the development of our banking sector. It will help promote economic integration between Hong Kong and the mainland and facilitate cross-border tourist spending,' Financial Secretary Henry Tang Ying-yen said in Beijing.
Hong Kong Monetary Authority chief executive Joseph Yam Chi-kwong, who is also in Beijing, will today sign a memorandum of understanding with the People's Bank of China (PBOC) on the agreement's regulatory framework.
Yuan debit and credit cards should be the first new services to emerge under the accord, Mr Yam said. This is because their implementation does not hinge on appointment of a yuan settlement bank to act as a conduit for currency flows back to China. That decision is expected before the end of the year, and will allow the implementation of yuan deposit, exchange and remittance services.
'If banks are ready, they can begin the yuan credit card business from tomorrow,' Mr Yam said.
Under the scheme, mainland banks can issue yuan debit and credit cards to Chinese nationals for use in Hong Kong. In turn, Hong Kong residents will be able to use yuan cards on the mainland.
Hong Kong Association of Bank chairman Raymond Or said it was not clear if mainland visitors would be able to use yuan cards to borrow money above current spending limits - an issue the association and PBOC will discuss today.
If such borrowing were allowed, it could greatly increase the spending power of mainland tourists in Hong Kong. The central government, however, is reluctant to allow large amounts of yuan to flow out of the mainland. The scheme will also allow Hong Kong residents to open yuan deposit accounts and earn interest at rates determined by participating banks.
With the yuan commanding higher interest rates than the Hong Kong dollar, Mr Or said there would be an incentive for depositors to convert Hong Kong dollars into yuan but denied this could create monetary uncertainty.
Yuan transactions will be subject to restrictions, with yuan account holders allowed to change up to 20,000 yuan per day and non-account holders restricted to daily exchanges of 6,000 yuan.
Shops, restaurants, hotels and other consumption-oriented businesses that process large amounts of yuan will be exempt from such limits, allowing for the currency's speedier repatriation to the mainland. Individuals will be able to remit up to 50,000 yuan per day from Hong Kong to mainland accounts.
The amount of yuan trapped in Hong Kong is estimated at between $40 billion and $65 billion. Bringing this underground flow into Hong Kong's banking system for easier monitoring and eventual repatriation to the mainland is a key objective of the scheme.
SERVICES OFFERED
Deposits: Hong Kong residents will be able to open RMB deposit accounts at participating licensed banks.
Exchange: Holders of RMB accounts will be able to convert yuan into HK dollars and vice-versa, to a maximum of 20,000 yuan per day. For people without RMB accounts, the daily limit will be 6,000 yuan.
Remittances: RMB account holders will be able to remit yuan from their Hong Kong accounts to accounts under the same name on the mainland. The maximum will be 50,000 yuan per person per day.
Renminbi cards: Mainlanders will be able to use mainland-issued RMB debit and credit cards in Hong Kong. Hong Kong residents will be able to get RMB debit and credit cards for use on the mainland.
