Yuan shares the next step: HKEx
Establishing a popular yuan-denominated share market in Hong Kong is the next big step for the yuan to become a global currency, says the head of the city's exchange.
Hong Kong Exchanges and Clearing chief executive Charles Li Xiaojia said the liquidity pool created by the increasing amount of trade settled in yuan is a good start. 'But for the yuan to become a real international currency like the US dollar, euro, yen or the Australian dollar, it still has a long way to go,' Li told a seminar yesterday. 'The internationalisation of the yuan is like running a marathon - it's a long-term game.'
He said mainland capital controls and the fact interest and foreign exchange rates are not determined by the market means the yuan cannot be freely traded by global investors like other currencies.
'The yuan will only become an international currency when investors and other people like using it. As such, it is important for Hong Kong to develop yuan-denominated shares and other yuan investment products,' Li said. These shares or derivatives would offer higher returns than yuan deposits or bonds, while companies would be able to raise funds in yuan share offerings in the city to finance mainland projects, he said.
While in Hong Kong earlier this month, Vice-Premier Li Keqiang announced eight measures to expand yuan business in the city. One of them was relaxing foreign direct investment rules so that - from next month - foreign firms can invest yuan holdings directly into mainland projects instead of using US dollars.
Secretary for Financial Services and the Treasury Chan Ka-keung said this would ease currency risks for companies with mainland projects, and that it made sense for them to use the yuan instead of the dollar.
Hui Xian Real Estate Investment Trust was the city's first yuandenominated initial public offering - it lost 9.35 per cent on debut in April.
Li said more measures to support yuan offerings would be introduced from October. These would include a dual option whereby new stocks could list in both the yuan and the Hong Kong dollar, and firms that have already issued shares in Hong Kong dollars could add yuan ones.
