Hang Seng Bank sees significant benefits in a proposal for Hong Kong banks to accept yuan deposits.
It says it could pave the way for the SAR to become an offshore centre for the yuan while extending its role as a leading international financial centre for China and the Asia-Pacific region.
In the latest issue of Hang Seng Economic Monthly, the bank said the pace of capital account liberalisation in China was not synchronised with the strong growth of external demand for yuan, led by the country's economic development and its World Trade Organisation membership.
This would inevitably lead to the need for an offshore currency market.
As Hong Kong had been in the forefront in the yuan's circulation outside the mainland, given the deepening economic integration between the two, it would be the natural choice for the offshore centre, the bank said.
In February, People's Bank of China governor Dai Xianglong said Hong Kong would be given priority to attempt any new product launches before the yuan was convertible.
As the yuan was widely accepted in Hong Kong and Macau, Beijing was considering allowing Hong Kong banks to take yuan deposits.