SDR inclusion offers 'historic opportunity for Hong Kong'
The Hong Kong Monetary Authority (HKMA) may allow its exchange fund to hold more yuan-denominated assets, the agency's chief executive Norman Chan said Wednesday, according to media reports.
During a visit to the Shanghai branch of the People's Bank of China (PBC), the country's central bank, Chan said the HKMA will gradually increase the proportion of yuan-denominated assets in its foreign exchange fund, Hong Kong's Ta Kung Pao newspaper reported Wednesday.
Chan said preliminary statistics showed that the level of yuan deposits in Hong Kong had stabilized in November, after a decline in deposits narrowed in October, and he hoped the trend would continue, according to the Ta Kung Pao report.
At the end of October, yuan deposits in Hong Kong had declined by 4.6 percent to 854.3 billion yuan ($133.52 billion) month-on-month, according to the HKMA.
The fall in October's yuan deposits was narrower than the decline of 8.5 percent in September, the HKMA said.
The fall in September came after the PBC's announcement in August that it would allow the yuan to depreciate by nearly 2 percent against the US dollar, the largest devaluation in two decades. The move led many yuan depositors to shift to other currencies, the South China Morning Post newspaper reported on Tuesday.
Before embarking on a 3-day trip to Beijing from Shanghai, Chan also disclosed that the HKMA is in talks with the PBC regarding a new Qualified Domestic Individual Investor 2 (QDII2) program, Ta Kung Pao said.
China would launch the QDII2 program in six cities: Shanghai, Tianjin, Chongqing, Wuhan in Central China's Hubei Province, Wenzhou in East China's Zhejiang Province and Shenzhen in South China's Guangdong Province, Reuters reported on May 26.
The initial QDII program is limited to institutions, while the new one would allow individual Chinese investors to invest in foreign markets, according to Reuters. Chan said the PBC is still considering details of the QDII2 program.
Chan's comments on Wednesday followed a decision by the IMF to include the yuan in the basket of currencies for its Special Drawing Rights (SDR) reserve currency, a move that the HKMA welcomed.
"Being the largest offshore renminbi business center with close economic and trade ties with [the Chinese mainland], Hong Kong should seize this historic opportunity and continue to strengthen our financial market infrastructure, as well as upgrading our talent pool and products," Chan said in a statement published on the HKMA's webiste Tuesday following the IMF's decision.
