Across The Border | Hong Kong’s yuan deposits fall 46 per cent from their 2014 peak
Analysts believe the RMB pool will continue to drain as a result of the devaluation of the yuan, and US interest rate rises
Yuan deposits in Hong Kong have dropped 46 per cent from their peak of December 2014, and analysts see no end in sight for the exodus, as the currency continues to devalue.
However, they also believe any damage to the city’s reputation as a leading offshore yuan trading centre will be largely undamaged, as long as the city can provide more new yuan products that help with the currency’s internationalisation process.
Yuan deposits in Hong Kong dropped to 546.7 billion yuan by the end of December, a sharp 35 per cent fall from 851.11 billion yuan in 2015 and down 46 per cent from the peak of 1.004 trillion yuan in December 2014, according to Hong Kong Monetary Authority. Those deposits at the end of last year were at their lowest level since 2012.
Let’s remember the yuan, also called the renminbi (RMB), is not yet fully freely traded on the international markets, but since 2009 Beijing has gradually allowed the world to use the currency to settle trade and in 2010 allowed the issuance of yuan-demoninated investment products.
Subsequently Hong Kong, quite naturally, positioned itself as a leading offshore yuan trading centre, and deposits held in the city of the Chinese currency just kept rising, from 2010 until the peak at the end of 2014, at just over 1 trillion yuan.