Announcement from central bank puts an end to months of anticipation The State Council gave the go-ahead yesterday for mainland financial institutions to issue yuan-denominated bonds in Hong Kong, a long-awaited move set to further bolster the city's role as a platform for yuan business. The announcement by the People's Bank of China ended months of anticipation. It also came days before Chief Executive Donald Tsang Yam-kuen is set to announce his policy agenda for economic development under the national 11th five-year plan on Monday. Widely floated by officials in recent years, the decision will further widen the scope of yuan business in Hong Kong by allowing mainland institutions to raise yuan and facilitate the return of yuan circulating in Hong Kong to the mainland. It also follows the introduction of yuan deposits in early 2004. These deposits in Hong Kong stood at 22.8 billion yuan at the end of November. Welcoming the move, Financial Secretary Henry Tang Ying-yen said although yuan bonds' trading would be limited initially, it was an important move to expand yuan business in Hong Kong. 'The new category of renminbi business is conducive to business opportunities for banks, and enhancing financial flows between Hong Kong and the mainland,' he said. The move also reaffirmed Beijing's support for Hong Kong's position as an international financial centre. A Hong Kong Monetary Authority spokesman said the move would 'further promote economic integration between Hong Kong and the mainland and enhance the channels for returning renminbi circulating in Hong Kong back to the mainland'. The spokesman said issuing yuan bonds in Hong Kong would help develop the local debt market, helping to build a diversified multi-currency financial infrastructure, which in turn would enhance the city's role as an international financial centre. The central bank said issuing yuan bonds would help expand the asset scope of Hong Kong banks and the choices for yuan-denominated investment by Hong Kong households and enterprises. Yuan bonds issued in Hong Kong will be limited to financial institutions on the mainland, with those having a high credit rating being given priority. Officials said last night a delegation from the Hong Kong government would head for Beijing early next week to thrash out details of the arrangement with the central bank. The date of implementation has yet to be fixed. Premier Wen Jiabao has said that Beijing recognises Hong Kong's unique position as an international financial hub in China. Acting chairman of the Hong Kong Association of Banks Julian Fong said the new measures would provide business opportunities for local bankers to underwrite the bonds, and a channel for mainland financial institutions to raise funds. Stephen Cheung Yan-leung, chair professor of finance at City University, said the decision was good news.