Mixed reaction from bankers on yuan trade rules
Bankers say the Hong Kong Monetary Authority's recent moves to waive certain paperwork for yuan trade settlement will help solidify the city's role as an leading offshore yuan centre.
But, to fend off intensifying competition from Singapore, it needs more policy improvements. While the policies may help improve slowing growth in settlements they do not help growth in yuan deposits.
Bankers earlier complained that cumbersome local requirements had led some companies to shift their yuan trade settlements to the island state. On Monday, the authority issued a circular aimed at clearing up misunderstandings about due diligence requirements for yuan trade settlements.
'The recent announcement from the HKMA is a very good response to market needs and feedback,' Frankie Au, director of transaction banking at Standard Chartered (Hong Kong), said. New details in the announcement could boost the use of yuan in trade settlements as the process became more efficient, Au said.
The HKMA stressed banks could forgo the process of reviewing supporting documents if they had 'reasonable assurance' that squaring yuan transactions through the clearing bank were for 'eligible yuan trade transactions'.
The 'reasonable assurance' is applicable to companies listed for at least three years in Hong Kong, the mainland, Taiwan, London or New York or any other jurisdiction belonging to the Financial Action Task Force, and that have had a relationship with the banks for more than three years.
Alternatively, the document reviewing process can be waived if a company or its subsidiary has had a business relationship with the bank for more than three years, the company has been in a mainland-related trading business for more than five years, with the relevant trading volume representing 30 per cent or more of the company's overall trade, and the mainland-related transaction value does not exceed 5 million yuan (HK$6.17 million).
Other bankers said that while the policies would help, the effects would not be as significant as bankers hoped.
Frankie Kwong, treasurer at Wing Lung Bank, said many of its unlisted clients often had transaction volumes of more than 5 million yuan, so the policies, while beneficial, would only affect a small proportion of their business.
'If you look at the market reactions, they are not that great,' Kwong said. 'Singapore has been chasing us rigorously and narrowing the competition.'
Growth in yuan deposits has been falling over the past few months, bankers say. Its growth depended on a number of factors such as trade volume, which could be both ways - inflow or outflow, repatriation of yuan under foreign direct investment, dim sum bond issuances and currency value, among others, Au said.
