HKMA lobbies Beijing to lift cap on yuan conversion
HKMA chief executive Norman Chan asks Beijing to lift cap on yuan conversion just weeks before cross-border equity trading starts
The Hong Kong Monetary Authority is lobbying Beijing to lift the cap on the amount of yuan local residents can convert as part efforts by the city's de facto central bank to boost the amount of mainland currency in the system given anticipated strong demand when the Stock Connect scheme with Shanghai gets going next month.
"[The People's Bank of China] indicated that there are no major problems in removing the daily exchange limit of 20,000 yuan (HK$25,200) for Hong Kong residents per person per day. We will endeavour to finalise this arrangement before the launch of the Shanghai-Hong Kong Stock Connect [plan]," Norman Chan Tak-lam, chief executive of the HKMA, said on the sidelines of a forum yesterday.
Demand for the yuan is expected to jump in Hong Kong because investors are likely to convert their US or Hong Kong dollars into yuan to buy mainland stocks listed in Shanghai. Hong Kong is currently the largest offshore yuan centre.
Apart from changes to the yuan daily conversion limit, two additional measures are on the policymaker's agenda in preparation for the scheme, scheduled to start on October 13.
The HKMA plans to provide up to 10 billion yuan of intraday repurchase facilities to ensure an ample supply of the currency during the trading session. The facility would allow eligible banks to obtain funds once their settlement account is insufficient to meet their outgoing yuan payment needs, said Chan.
HKMA will charge a fee, based on the actual time used during the day, for use of the repo facility, Chan said. He did not elaborate on the amount.