As RMB trade hub, London no threat to HK

Hong Kong (CNS) -- Hong Kong has a giant yuan clearing system and owns an abundant sum of foreign direct investment, complemented with plenty of investment tools from bonds to exchange traded funds, all promising its future status as an offshore renminbi (RMB, or yuan) financing center, George Leung, an economist with the HSBC, told CNS on Thursday.

The HSBC issued an RMB denominated bond worth 2 billion yuan (about US$317 million) in London on Wednesday. As the first RMB bond issued outside Chinese sovereign territories, it has been well subscribed by Asian and European investors.

London handles most of the world's foreign exchange trade turnover, making it a good bet for the internationalization of the RMB, pointed out Tse Kwok-Leung, head of economic research at the Bank of China (Hong Kong), on Wednesday.

But because Hong Kong has geographical advantages and established yuan-clearing business ties with more than 70 countries and regions, it will benefit from London rather than be replaced or face competition, he added.

Tse urged the Chinese government to encourage mainland private companies to raise funds in yuan from Hong Kong to stimulate low capital vitality, a move that would also solve the financing troubles confronting private small and middle-sized enterprises on the mainland.

The Qianhai District co-developed by Shenzhen and Hong Kong can serve as a pilot zone to connect domestic and offshore yuan markets, suggested Tse. He also advised that the limit on exchange between yuan and Hong Kong dollars should be properly relaxed.

London reached an agreement with the Hong Kong Monetary Authority in January to introduce yuan settlements across time zones starting from June.