Shanghai free-trade zone

Hong Kong delegation to meet Chinese leaders on Shanghai yuan rivalry

Delegation to hold talks with regulators and State Councilover free-trade zone

PUBLISHED : Monday, 14 October, 2013, 12:00am
UPDATED : Monday, 14 October, 2013, 1:51pm

Hong Kong bankers will meet the State Council and the nation's financial regulators this week for briefings on the development of the free-trade zone in Shanghai and the internationalisation of the yuan.

The Shanghai free-trade zone is set to become a testing ground for yuan convertibility and the prospect has alarmed some bankers in the city, who are concerned that Hong Kong's role as an offshore yuan trading centre could be diminished.

"Given the concerns about the potential competition, we are hoping to get more details about the opening up of this zone and how we may differentiate Hong Kong's role," said a banker who will join the delegation.

The delegation will be led by Norman Chan Tak-lam, the chief executive of the Hong Kong Monetary Authority, and Benjamin Hung Pi-cheng, the Hong Kong chief executive of Standard Chartered and also the chairman of the Hong Kong Association of Banks.

Members will include HSBC's Hong Kong chief executive Anita Fung Yuen-mei, Bank of China (Hong Kong)'s chief executive He Guangbei, Hang Seng Bank's retail banking and wealth management head Nixon Chan Lik-sang, Bank of East Asia's deputy chief executive Tong Han-shing, and a number of other senior executives of Hong Kong banks.

They fly to Shanghai for meetings on Wednesday with officials of the Shanghai branch of the China Banking Regulatory Commission and the People's Bank of China, as well as the Shanghai municipal government. They will then go to Beijing to meet the State Council, the Ministry of Finance, the China Securities Regulatory Commission and the PBOC on Thursday and Friday, according to a source.

"The internationalisation of the yuan is of course a hot topic. But I don't expect the delegation to return with a 'big gift' - a breakthrough in policy that will benefit Hong Kong," said a banker who declined to be named.

The timeline of Beijing's opening up of its capital account and financial reforms are expected to be discussed.

Since August last year, non-Hong Kong residents have been allowed to open yuan deposit accounts and transact at the offshore yuan rate without being subject to a daily conversion limit of 20,000 yuan (HK$25,300).

A report by ANZ Bank has suggested that further relaxation of offshore trade in the yuan could be done by either revising the existing yuan personal business agreement with clearing bank BOCHK or allowing banks to open offshore yuan-based personal business.

Bankers said they were expecting the Ministry of Finance to address future yuan bond issuance plans in the city. The ministry announced in June that it would issue 3 billion yuan of bonds in Hong Kong for retail investors in the second half of the year, although the issues have yet to be launched.

Some bankers want to know the impact on the mainland economy and on capital flows when the United States begins to taper its bond-buying programme.