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Hong Kong Monetary Authority

Offshore trading of yuan rises in Hong Kong

Settlement in currency between non-mainland parties grows in city amid international push

PUBLISHED : Saturday, 15 December, 2012, 12:44am
UPDATED : Saturday, 15 December, 2012, 4:38am

Yuan trade between non-mainland entities has risen to 18 per cent of the total yuan deals settled in Hong Kong, as Beijing seeks a greater role for the currency in global trade.

These transactions were part of the 2.1 trillion yuan (HK$2.6 trillion) of trades in the first 10 months of this year, Hong Kong Monetary Authority chief executive Norman Chan Tak-lam said.

Chan added that 18 per cent was a significant figure, considering the transactions accounted for 10 per cent of all yuan trade in 2010.

He did not elabourate on the figures for last year.

HKMA figures show trade settlement in yuan in Hong Kong rose 40 per cent in the first 10 months from the same period last year, exceeding the full-year amount for last year.

Outstanding yuan loans more than doubled to 70 billion yuan in October from about 30 billion yuan at the end of last year.

In 2003, Beijing introduced an offshore currency facility in Hong Kong to enable overseas investors to use the city’s banking services to tap into the mainland market.

Taiwan gained yuan-clearing rights in August, while Singapore and London are also vying to become offshore clearing hubs for Southeast Asia and Europe, respectively.

Hong Kong banks are lobbying Beijing to further relax restrictions on the yuan settlement business as competition from London, Singapore and Taiwan intensifies.

“As the yuan internationalises and is used more in cross-border payments, more trades among offshore markets are settled in yuan and are handled through Hong Kong,” Chan said in Beijing after meeting mainland officials including banking and securities regulators.

The yuan business has been a new focus for banks since Beijing chose Hong Kong to help push the currency in international trade and bond offerings.

The yuan is not fully convertible but since mid-2009, the central government has gradually relaxed rules for the yuan business, allowing companies to settle in the currency and issue yuan bonds.

Hong Kong is the world’s largest offshore yuan trading centre, where non-mainland companies, institutions and residents can trade the currency and settle trade deals.