Pressure on Hong Kong to remain top yuan hub
The first part of a series marking the 10th anniversary of yuan business in Hong Kong examines the rise of rivals for the role
After a decade as the only city in the world allowed to conduct offshore yuan business, Hong Kong is now facing fierce competition to its role as the leading offshore yuan centre.
A long list of cities are joining the game, with Beijing no longer offering Hong Kong exclusive rights to the business.
In November, Hong Kong will mark the 10th anniversary of the State Council's approval of yuan business for local lenders. In 2003, an agreement was signed between the Hong Kong Monetary Authority and the People's Bank of China which allowed banks in Hong Kong to offer yuan deposit, remittance, exchange and credit card services from early 2004.
The agreement had nothing to do with the internationalisation of the yuan but was a show of support from Beijing as the city's economy battled back from the blow to confidence caused by the severe acute respiratory syndrome outbreak earlier that year.
When Beijing did kick off its plan to turn the yuan into an international currency, in mid-2009, it used Hong Kong as a testing ground, allowing the city to be the first to conduct cross-border trades in yuan. A year later, Beijing allowed yuan transfers from individual and financial firms' accounts, enabling Hong Kong firms to issue bonds, funds, shares or insurance policies in yuan.
"Many of our clients prefer to do yuan investment due to its continuous appreciation," said Joseph Tong Tang, an executive director of Sun Hung Kai Financial, highlighting the yuan's almost 30 per cent rise against the US and HK dollars since 2004.