Author: CHUNG Yoon Ngan
Date: 05-20-12 02:36
Yuan offshore center devt boosts HK-mainland link
By Li Tao
May 19, 2012 - 8:54am http://www.chinadailyapac.com
Hong Kong will continue to play a critical role in the yuan’s internationalization process despite stepped up efforts by some leading financial centers such as London and Singapore as well as some mainland metropolises to play a bigger role in this area, experts said.
There is no other place like Hong Kong where investors possess such good knowledge on Chinese currency rules, and this is complemented with the city’s economic and legal regimes that provide continual support for the currency. Therefore, Hong Kong will continue to outperform mainland metropolises including Shanghai and Shenzhen which aspire to build up into yuan offshore centers, according to John Tan, head of Global Markets from Standard Chartered Bank (HK) Ltd.
As the fast establishments of new yuan offshore centers overseas may possibly lead to deviations in the process along the route as expected by the Chinese government, Hong Kong, which became the first yuan offshore center during its internationalization, should also serve as the gatekeeper for the central government in the process, Tan said during a forum held in Hong Kong on Friday.
“It is a big pie, and different economies will play different roles in the process,” said Mark McCombe, chairman of BlackRock Asia-Pacific. “Hong Kong is not under threat. The city is flexible with changing dynamics in the region and will continue to play a critical role,” McCombe said.
Hong Kong’s development as a yuan offshore center has reinforced the financial linkages with the mainland, and this process is set to continue, leading to more systemic integration, according to a Chatham House report released the same day.
“Within this framework, closer cooperation and coordination among Shanghai, Hong Kong and Shenzhen should develop gradually,” said the report, adding that a currency repatriation scheme bridging the yuan onshore and offshore market, is also shaping up between Shanghai and Hong Kong.
David Wong, deputy chief executive of Bank of China Hong Kong believes the whole yuan’s internationalization process is an “evolution” given the notable achievements made during the last two years. With further favorable policies expected to be released in the near future, more volatilities in the foreign exchange and movement are likely to be seen in the market.
Wong suggested at the forum that the Hong Kong government should further liberalize yuan’s convertibility in the city as local residents are currently capped to buy only up to 20,000 yuan per day. He also advises yuan settlement to be extended to more industries, including logistic services, to further boost yuan liquidity in the offshore market.