Five senior Chinese economic and financial officials attend a joint news conference in Hong Kong, south China, June 30, 2012. Five senior Chinese economic and financial officials on Saturday elaborated on an array of supportive measures just unveiled by the central government to enhance cooperation and exchanges between the mainland and Hong Kong. (Xinhua/Cheong Kam Ka)
BEIJING – China’s central government has unveiled an array of supportive measures to enhance cooperation and exchanges between the mainland and Hong Kong and to further support Hong Kong's economic and social development.
The measures, announced on the eve of the 15th anniversary of Hong Kong's return to the motherland, cover six broad areas, namely trade and economy, finance, education, science and technology, tourism and cooperation between Guangdong Province and Hong Kong.
Fifteen years after its historic return on July 1, 1997, Hong Kong’s economy, living through a crippling regional financial crisis and global financial crisis, is thriving and its role as an international financial hub has since been elevated and enhanced.
It grew 5 percent on average between 2004 and 2011, outpacing most developed economies, and it is continually ranked by international financial institutions as one of the world's most competitive economies. In terms of financial prowess, Hong Kong is deemed on a parallel with New York and London as the coined term “"Nylonkong" appeared on Times Magazine suggests.
HK’s status as offshore RMB hub
The central government vowed to promote the further development of the offshore yuan market in Hong Kong to help secure Hong Kong's status as a major international financial hub.
The central government will encourage foreign investors to use China's currency, the yuan, to conduct trade settlements and investment in Hong Kong.
Other financial policies include improving the variety of offshore yuan-based services in Hong Kong and facilitating long-term investment from Hong Kong in the mainland's capital market.
The central government will encourage mainland and Hong Kong enterprises to invest abroad together and promote coordination among airports, harbors and train systems in the Pearl River Delta, including Hong Kong.
The move to expand offshore use of yuan will further secure Hong Kong's place as a major international financial centre, said Andy Ji, currency strategist at Commonwealth Bank Of Australia in Singapore.
It also "will help boost renminbi demand in general as more instruments (for yuan-related investments) are made available," he said.
In another move, China's Ministry of Finance (MOF) announced to issue 23 billion yuan (3.64 billion U.S. dollars) in yuan-denominated sovereign bonds in Hong Kong, the fourth and largest of its kind, as an effort to support Hong Kong's economy.
According to a memorandum of cooperation signed by the ministry and the Hong Kong Exchanges and Clearing Limited (HKEx), yuan- denominated sovereign bonds can get listed in HKEx.
"I believe the inaugural listing of yuan sovereign bonds will increase institutional investors' recognition of sovereign bonds and encourage listing of more yuan bonds in Hong Kong," said Donald Tsang, former chief executive of Hong Kong.
Tsang also believed the status of the HKEx as a secondary market for transactions of yuan products will thus be enhanced.
This move will provide the central banks with a new channel for capital flow as well as further promote the internationalization of the yuan, Vice Minister of Finance Li Yong said.
Looking ahead, Li said the MOF will continue to expand the scale of yuan sovereign bond issuances in Hong Kong on a long-term basis, giving its full support for the development of offshore RMB businesses in Hong Kong.
With increasing demand for RMB financing, issuance of offshore yuan-denominated bonds in Hong Kong (dim-sum bonds) reached 108 billion yuan in 2011, three times the total of 2010 with a broader range of issuers.
The issuance of RMB sovereign bonds for the fourth time demonstrates clearly the central government's support for Hong Kong's development as an offshore RMB business center," said the city's Secretary for Financial Services and the Treasury K C Chan.
The offshore RMB bond market started in 2007 when China's central bank permitted mainland-based financial institutions to issue RMB bonds in Hong Kong.
Hong Kong now possesses the largest offshore RMB liquidity pool, with offshore RMB deposits growing from 310 billion yuan at the end of 2010 to 589 billion yuan at the end of 2011.
According to the Hong Kong Monetary Authority (HKMA), trade settlement in RMB handled by banks in Hong Kong amounted to 1,915 billion yuan in 2011, more than five times the amount settled in 2010.
