Bankers left shaken and stirred by mixed signals on yuan

My friend is learning to mix cocktails. His grandfather, who likes to show off his wine collection, challenged him to be innovative and mix all types of cocktails - whisky showers, seven rainbows, pina coladas ...

My friend, a loyal grandson, made many cocktails. He then asked his friends to try them, which they did - with predictable results. A worried grandfather took away the cocktail shaker and glasses and said the drinking quota had been filled.

My friend did not want to spoil the party so he took out his own reserve wine for the guests and promised he would bargain with his grandfather to secure a higher drinking quota for next year's party.

But will the guests return? This is not pure fantasy. It is a fable that shows what has happened to our yuan trade business.

While our bankers happily pursued their new darling business of yuan trade settlements, their watchdog (grandfather), the Hong Kong Monetary Authority, announced that the annual 8 billion yuan (HK$9.26 billion) settlement quota for the year had been reached. This meant the bankers could no longer get the yuan they needed to continue their business from the appointed clearing agent, Bank of China (Hong Kong).

So the HKMA was obliged to make a swap arrangement with the People's Bank of China to obtain 10 billion yuan to help banks settle their outstanding trades.

Bankers were caught by surprise and, like my friend, embarrassed. Many questions were raised.