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HKIC Recommends 12 Measures to Promote Hong Kong as an RMB Settlement Centre


PRESS RELEASE (Hong Kong – 6 July 2009) Hong Kong Ideas Centre (HKIC), whose aim is to provide constructive and innovative recommendations conducive to Hong Kong’s economic and social well being through  research, today recommended 12 measures to promote Hong Kong as a Renminbi (RMB) Settlement Centre.

The 12 measures, based on a study conducted by its RMB Study Group, focus on four major areas: 1) RMB settlement and financing for cross-border trade; 2) RMB investment; 3) personal savings and consumption; and 4) related financial risk management. 

Mr. Fung Siu Por, Lawrence, Chairman of HKIC’s Board of Directors said, “With China playing an increasingly important role in the global economy, the use of RMB is expected to become more popular. Hong Kong should seize the opportunity to develop its RMB business in order to open up opportunities for the banking and financial sector, as well as offer convenience and investment products to the people of Hong Kong.”

“Since Hong Kong has an advanced payment system and a clearing mechanism for RMB, we can immediately provide a global platform to facilitate trade settlement in RMB. However, Hong Kong is faced with a RMB liquidity problem, which means that RMB supply in Hong Kong cannot cater for the demand of RMB trade settlement.  HKIC, therefore, conducted an in-depth research to find ways to improve the liquidity of RMB. Based on our findings, we would like to propose 12 measures for consideration by the government and business sectors,” added Mr Fung.
 

Another member of the RMB Study Group, Mr Wong Kai Man, an experienced professional accountant and a non-executive director of Securities and Futures Commission suggested, “To facilitate trade settlement in RMB, we suggest allowing banks in Hong Kong to provide RMB trade financing. The Mainland government can encourage Mainland enterprises to pay for imports from Hong Kong in RMB, and can gradually increase the number of pilot cities and pilot enterprises with which Hong Kong companies can do business in RMB. To help Hong Kong companies hedge against exchange risk, measures should be taken to gradually develop an RMB futures market.”

“To encourage individuals and companies to hold and use RMB, it is important to have more RMB investment vehicles in Hong Kong. More RMB bonds should be issued in Hong Kong and bond issuers can be as diverse as possible, including international organisations such as World Bank and Asian Development Bank, Mainland enterprises, Hong Kong companies which have investments in the Mainland, and quasi-government organisations, such as Hong Kong Airport Authority.  To pave the way for the secondary RMB bond market, the maturity periods of RMB bonds should also be more diverse, and RMB bonds should be allowed to be listed on the Hong Kong Stock Exchange.

 In addition, we recommend the introduction of RMB-denominated Exchange Traded Fund (ETF) in Hong Kong. We also suggest the Central Government to allow foreign investment within the Mainland to be made in RMB and the SAR Government to hold part of its reserves in RMB assets,” added Mr Wong.

Ms Vivien Li, HKIC’s RMB Study Group Consultant said, “In the area of personal savings and consumption, we recommend a gradual relaxation of the existing personal daily RMB exchange limit from $20,000 to $30,000, and to offer RMB-denominated life insurance policies to provide more investment and savings opportunities to members of the public.
 

In the area of risk management, Ms Li suggested that the regulatory authorities in Hong Kong and the Mainland could work closely together to monitor the cross-border flow of RMB and the retention of RMB offshore. “At the initial stage, it may be desirable to regulate and monitor the overall volume of RMB financing to ensure financial stability,” said Ms Lee.

Another member of HKIC’s RMB Study Group, Mr Leung Ka Chai, former Chairman of Hong Kong Exchanges and Clearing Limited and former member of Task Force on Economic Challenge, concluded, “To ensure that Hong Kong’s position as an international financial center can be further enhanced and that Hong Kong can contribute to China’s financial modernization, we earnestly hope that the above recommendations will be implemented.”

 
Enquiry: Yvonne Kwok / Bruce Law

Telephone: 2114 1488

6.7.2009

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