Banks face reality - yuan is stronger than the HK dollar
Your bank is not making a mistake when the teller gives you less than 100 yuan for HK$100 - the value of the yuan has surpassed that of the Hong Kong dollar in Hong Kong.
In the mainland foreign exchange market, the yuan has still not reached parity, but it is getting very close. The exchange rate yesterday was HK$1 to 1.00202 yuan in late afternoon trade, while the yuan closed at 7.809 to the US dollar.
Foreign exchange dealers expect the yuan to continue climbing and level with the Hong Kong dollar soon.
'It could happen within one to two weeks,' said Philip Lau Cheuk-hang, Citic Ka Wah Bank's executive vice-president and treasurer.
However, most Hong Kong lenders, including HSBC, Hang Seng Bank and some city branches of mainland banks, such as Bank of China (Hong Kong) and China Construction Bank (Asia), are already asking customers to pay more than HK$100 for every 100 yuan.
On yesterday's board rates, customers could get around 99.7 yuan for HK$100 from HSBC compared with 100.06 yuan on December 28, while BOCHK was offering customers 99.70 yuan for every HK$100.
However, customers could still get 1 yuan or slightly higher for their Hong Kong dollar from lenders such as the Bank of East Asia, Wing Hang Bank, Wing Lung Bank and Dah Sing Bank.
Sunny Cheung Yiu-tong, head of consumer banking at DBS Bank (HK), said: 'The yuan has reached parity or its value is even higher than the Hong Kong dollar when people are buying the mainland currency. However, the yuan still hasn't reached parity when customers are selling yuan to banks.'
Despite the appreciation of the yuan, Mr Cheung said deposit and exchange activities had not changed much recently. The yuan has risen more than 5.7 per cent since its revaluation in July 2005. 'However, the yuan deposit rate, which stands below 1 per cent, is still not attractive enough. I think people's attention is on the robust stock market,' he said.
Yuan deposits in Hong Kong banks remained stable at 22.83 billion yuan in November, up slightly from 22.58 billion yuan in October.
Meanwhile, Mr Lau of Citic Ka Wah Bank expects the yuan will strengthen by 5 per cent against the US dollar to below 7.42 by the end of the year, when the Hong Kong dollar 'may fall to 93 to 95 yuan for every HK$100'.
A stronger yuan could benefit Hong Kong because mainland tourists will have more money to spend, but it could also fuel inflation, as much of the city's food and other goods come from the mainland.
