The People's Bank of China (PBOC) will pay $42.5 million for a stake in the company which prints Hong Kong's bank notes. An agreement to buy the stake was signed yesterday with the Hong Kong Monetary Authority. The authority said PBOC subsidiary China Banknote Printing and Minting Corp (CBPMC) would buy a 15 per cent stake in Hong Kong Note Printing (HKNP), which was 100 per cent owned by the Hong Kong Government. Sources said yesterday the deal seemed to be aimed at boosting the banknote printer's security capacity ahead of a possible deal to give it the right to produce the future Special Administrative Region passports. According to the Monetary Authority, the agreement between the Financial Secretary, Donald Tsang Yam-kuen, and CBPMC will result in the sale of 3.82 million shares in HKNP. HKNP operates a banknote printing plant in Tai Po, printing notes issued by the three note issuing banks: Hongkong Bank, Standard Chartered Bank and the Bank of China. Early last year the government, using Exchange Fund reserves, bought the plant from British note printer De La Rue for $255 million. That deal ended a 100-year tradition of entrusting note printing to the private sector. Mr Tsang said HKNP would benefit from the new business relationship, given CBPMC's expertise in banknote printing and its position in China in security printing. A monetary authority official refused to comment on speculation that HKNP would be used to print SAR passports. But he said that having CBPMC on board would enable it to look for more security printing business. CBPMC has expertise in banknote printing, including design, plate-making and printing of banknotes and the manufacturing of anti-counterfeit papers and printing inks. It operates 15 printing and minting plants as well as a technology development institute. The chief executive of the monetary authority and chairman of HKNP, Joseph Yam Chi-kwong, said the deal with the PBOC was an attempt to explore business opportunities for the banknote printer. 'While the printing of Hong Kong dollar banknotes will continue to be its core and profitable business, HKNP needs to explore other security printing business opportunities both within and outside Hong Kong,' he said. Rafael Hui Si-yan, Secretary for Financial Services, ruled out any suggestion of pressure from China to take a share in HKNP. 'The Bank of China is already one of the three note issuing banks in Hong Kong and it is no surprise for the People's Bank of China's subsidiary to buy into the banknote printer.' 'The other two note issuing banks will also have the chance to become shareholders of the note printer.'