The non-convertibility of the yuan has helped fuel a demand for Hong Kong dollars, according to a paper published by the Bank for International Settlements.
Demand for Hong Kong currency on the mainland had increased steadily in recent years, despite the fact that the yuan gained popularity in the region in the 1990s due to the relative strength of the mainland economy, the Hong Kong Monetary Authority's head of economic research, Peng Wensheng, said in the paper.
According to the paper, the net inflow of Hong Kong dollars into the mainland seemed to have reversed in recent years.
Mr Peng estimates that 15 to 25 per cent of the total outstanding stock of Hong Kong dollars - or HK$21 billion as of June last year - is in offshore circulation. This compares with HK$20 billion and HK$18 billion at the end of 2001 and 2000 respectively.
'The unabated demand for Hong Kong dollars in the face of a stable yuan probably reflects a combination of factors,' Mr Peng said.
'Holdings of Hong Kong dollar banknotes ... represent a means of accumulating foreign assets for some individuals and businesses firms on the mainland.'