Hong Kong Exchanges and Clearing plans to introduce a 'yuan trading support facility' in an effort to ensure investors have enough currency to fuel expected demand for yuan denominated stocks in the city.
SCMP, March 3
From the way the talk on yuan trading goes, you get the impression that a crack has finally opened in China's closed capital account and it can only grow wider now until the dam has split wide open and the yuan is a freely exchangeable currency across the world.
Don't be too sure. What we really have here is a Hong Kong anomaly that may yet prove to be only a temporary one. The anomaly is that suddenly everyone in this town wants to hold yuan where previously it was a scorned currency that you held only for necessary cash transactions across the border.
There are two reasons for this change. The first is that yuan deposits actually pay you an interest rate. It's still well under 1 per cent, but you need a microscope to see Hong Kong dollar interest rates.
The second, and more important, reason is that the yuan is strengthening once more against the US dollar. The universal reasoning has it that there is only one way to go - stronger yet. And for once, the universal reasoning may just be right.