Yuan deposit services off to sluggish start
Yuan banknotes are apparently comfortable to sleep on.
With Hong Kong banks now offering yuan deposit services, Hong Kong residents finally have a place other than under their mattresses to deposit their supposedly vast reserves of the mainland currency.
According to some estimates, tens of billions of yuan have been trapped in Hong Kong after being transported here over the years by mainland tourists.
But large hoards of yuan notes failed to materialise at tellers' counters when the services started on Wednesday. A Hong Kong Monetary Authority survey of 13 banks found they collected just 383 million yuan on Wednesday and Thursday - with most depositors exchanging Hong Kong dollars for yuan rather than coming in with previously hidden banknotes.
The case of the still-missing yuan suggests that Hong Kong residents either like their yuan under their beds - or had little to begin with.
The latter situation would suggest the existing network of foreign exchange dealers, who buy yuan from Hong Kong retailers and sell it on to mainland-bound businessmen and tourists, had provided an effective repatriation mechanism all along.
'It is a bit slow. We found that many clients are still adopting a wait-and-see approach to the yuan services,' HSBC Hong Kong general manager Raymond Or said. 'This is not a surprise. Unlike initial public offerings which set a deadline for investors to rush to bank branches to submit their applications, bank customers can open yuan accounts any time they want.'
Hong Kong bankers blamed the slack demand in part on a daily exchange limit of 20,000 yuan, meaning an individual wanting to convert the Hong Kong dollar equivalent of one million yuan into the mainland currency could only do so over 50 days.
There is no limit on deposits of yuan banknotes that individuals already have on hand.
'We have had clients who wished to convert a few million Hong Kong dollars into yuan to take advantage of the higher interest rate [for yuan deposits],' said one Liu Chong Hing Bank executive, who asked not to be identified. 'But under the current rules it will take a long time to be able to do that.'
He suggested increasing the daily conversion limit to 50,000 yuan.
Bankers also pointed to the fact that corporate clients could not open yuan accounts, even though it was Hong Kong retailers who would benefit the most from yuan deposit services.
For example, Hang Fung Gold Technology Group, which operates a gold and diamond mart in Hunghom, collects 600,000 yuan daily from mainland tourists but is not allowed to open a corporate yuan account.
