Beijing financial experts and officials on Monday urged the Hong Kong government to help speed up the internationalization of the renminbi by encouraging the use of Chinese currency in the city’s capital markets.
âIf the genes of Hong Kong’s long-term prosperity and stability are that the city faces the world with mainland support behind its back, Hong Kong’s blood system is the renminbi,â Zhou said. Chengjun, head of the People’s Financial Research Institute of the Bank of China (PBoC), said at a seminar on China’s 14th Five-Year Plan from 2021 to 2025.
Zhou said Hong Kong has the conditions and foundation to become a global center for renminbi asset management, value addition and risk management and that the government should redouble its efforts to achieve this goal.
Since 2009, China has seen an increasing use of its currency in trade settlements after the PBoC first allowed China’s cross-border trade to be settled in renminbi. He encouraged Chinese companies to buy assets abroad with renminbi, but most foreign companies used their renminbi to buy equipment, raw materials and pay wages on the mainland, as there was no not enough renminbi investment products to buy.
On March 12, the National People’s Congress approved the five-year plan, which called for economic integration and technological cooperation between Hong Kong and the Great Bay region.
According to the plan, Beijing will help improve Hong Kong’s status as an international financial, maritime, trade and aviation center and strengthen the city’s functions as a global renminbi offshore business center, international center of asset management and risk management center.
As the world’s largest offshore renminbi hub, Hong Kong has accumulated 810 billion yuan ($ 125 billion) in renminbi capital over the past decade. For many years, investors demanded more renminbi products in Hong Kong.
Chief Executive Carrie Lam said in June that the Hong Kong government had prepared for the upcoming launch of the Wealth Management Connect and Bond Connect programs southbound, which would strengthen connections between the financial markets in Hong Kong and the United States. continent. She said the government would seek new channels to increase cross-border renminbi flows with the mainland and strengthen Hong Kong’s status as a renminbi hub.
On Monday, the Hong Kong government held a seminar titled “Seizing the Opportunities of the 14th National Five-Year Plan” in the dining hall of the Legislative Council Complex.
Lam said Hong Kong’s development should be closely linked with that of the mainland, as this is the key to the city’s continued success.
âWe have to lean on our country and face the world. With the unwavering support of the central authorities, we will be able to do more, âshe said.
âWe must maintain our competitiveness and we must achieve prosperity and stability. We will implement the global competence of central authorities over Hong Kong. We will integrate our development with that of the country.
Luo Huining, head of the Beijing Liaison Office in Hong Kong, said at the seminar, âHong Kong must have a deep understanding of the country’s new development concept, so that we can build a new model of comprehensive development.
âThe spirit of rejuvenation of the great Chinese nation is the trend that cannot be stopped. For Hong Kong, the greatest development opportunity is on the mainland. Hong Kong must seize these opportunities.
As of August 2020, more than 53% of trade and investment between the Greater Bay Area and Taiwan had been settled in renminbi, which is expected to be called the largest transaction and settlement currency in the region, Zhou said.
âOver the past two years, the PBoC has emphasized that the Chinese currency should dominate in China’s foreign trade transactions and settlement,â Zhou said.
As Hong Kong has a strong influence in Southeast Asian countries due to its knowledge of the region’s financial situation, it can help Chinese companies facilitate their overseas investments and modernize industries. with their renminbi. “
Zhou urged the Hong Kong government to undertake reforms and launch new policies to help achieve the internationalization of the renminbi.
Joseph Yam, member of the Executive Board and former Managing Director of the Hong Kong Monetary Authority, said Hong Kong has a role to play in helping to connect the financial markets of the mainland and overseas countries and fit into the paradigm of China’s “dual flow” development. He suggested that investors should be allowed to trade Hong Kong shares in renminbi.
Salina Yan Mei-mei, Permanent Secretary for Financial Services and Treasury (Financial Services), said the government remains open to launching more renminbi investment products in Hong Kong, but the pace will depend on market demands. and regulatory approvals.
The central government’s latest move to highlight Hong Kong’s status as an international renminbi hub came after Beijing decided to delay the implementation of its anti-foreign sanctions law in Hong Kong last Friday.
Analysts have warned that foreign banks may have to leave Hong Kong because they will not be able to comply with US sanctions and China’s anti-sanctions law at the same time. They said the exodus of foreign banks would hit Hong Kong markets and slow the pace of the renminbi’s internationalization.
Yam said on Monday that it would be better to spend more time examining the potential impact of the Hong Kong version of the anti-sanctions law. He said that when Carrie Lam was sanctioned by the United States, she took the initiative to close her bank accounts to prevent her banks from getting into a difficult situation. However, Yam said, when there was an anti-sanctions law in Hong Kong, foreign countries, especially the United States, are unlikely to allow Hong Kong-based foreign banks not to apply their sanctions. .
Read: Beijing blocks its plan to impose an anti-sanctions law on Hong Kong