Hong Kong to see surge in yuan loans to Qianhai

Cross-border yuan loans to firms in the Qianhai special economic zone may exceed the volume of yuan loans in Hong Kong in two to three years, a senior banker at Citibank said.

Anson Kwok, the managing director and head of commercial bank at Citi, said firms in Qianhai might take out yuan loans in Hong Kong to pay off old loans on the mainland, where interest rates are higher.

Kwok said that could be one of the main drivers of the growth of Hong Kong banks' yuan loan business in Qianhai.

Because of the free market in Hong Kong, banks in the city competed to make yuan loans by offering lower interest rates, he said.

But he said it was too early to project the amount of loans the banks would be able to generate in Qianhai, and that largely depended on the flexibility in borrowing that mainland regulators would allow firms in the zone.

Beijing has used the zone, about an hour by car from Hong Kong and managed by the Shenzhen government, since June last year to experiment with a freer flow of the yuan and convertibility of foreign exchange for investment purposes.

More than 100 corporate clients attended a Citibank seminar yesterday on opportunities in the Qianhai zone.

Meanwhile, Tan Shiming, a global yuan product manager at Citi, said sales of yuan hedging treasury products had risen recently because of the yuan's appreciation.

The transaction volume of such products grew 25 per cent in the first quarter compared with the same period last year.