Hong Kong's de facto central bank chief, Norman Chan Tak-lam, has called for changes to allow cross-border transactions settled in United States dollars to be payable in yuan.
The move could be followed by a further relaxation of cross-border flows of yuan in both directions, Chan said, in tandem with the liberalisation of the mainland's capital account.
"This will not only help promote the development of Hong Kong as the offshore yuan business centre, but also enable Hong Kong to play a significant role in the reform and opening of the financial system on the mainland," said Chan, chief executive of the Hong Kong Monetary Authority, in an article published yesterday in the authority's inSight series.
Reviewing progress made since the launch of yuan business in Hong Kong in 2004, Chan said the Hong Kong offshore yuan market and the related financial infrastructure had made substantial advancement.
Among the milestones, he said, was yuan trade settlements handled by banks in Hong Kong in 2012 reaching 2.63 trillion yuan (HK$3.24 trillion), up 37 per cent from 2011; issuance of yuan "dim-sum" bonds totalling 112.2 billion yuan; and total outstanding amounts on dim-sum bonds reaching 237.2 billion yuan, a 62 per cent increase on 2011.
Yuan bank lending grew at an even more remarkable pace, Chan said, with the total amount of outstanding yuan loans increasing by 157 per cent from 30.8 billion yuan to 79 billion yuan during the year.
Customer deposits and outstanding amounts of certificates of deposit issued by banks totalled 720.2 billion yuan at the end of 2012, up 9 per cent from the beginning of the year.
"Looking ahead, further growth of Hong Kong's offshore yuan market will, to a large extent, depend on the efficacy of corporates and financial institutions in grasping the business opportunities afforded by the vastly expanded policy headroom," Chan said.
In particular, Hong Kong should pursue the opportunities that are presented by the growing use of the yuan in international transactions by expanding its business links with other centres, he said.
On the policy front, Chan said, he looked forward to a "further widening of the bridges for the circulation of yuan funds between the onshore and offshore markets".