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A Hong Kong branch of Bank of China advertises RMB-denominated sovereign bonds. (File photo/Xinhua).
The newly opened investment channels have given Hong Kong a competitive edge as the leading offshore RMB market, prominent figures from the city’s financial sector said Tuesday at a forum.
Anita Fung, CEO of HSBC Hong Kong branch, said at the 6^th^ Asian Financial Forum that in addition to the dim sum bond market, therehas been recent development ofother investmentchannels including the QDIIand RQFII program, boosting Hong Kong as an ideal platform for the development of renminbi as an investment currency.
Quoting China’s top financial regulator Guo Shuqing’s remarks at this forum about further expansion of RQFFI (RMB qualified foreign institional investment), QDII (Qualified Domestic Institutional Investors) and opening up of RMB, she said, “RQFFI is not only in bond but also include equities, and we're waiting earnestly in terms of the latest increase of investment quota.
Guo, chairman of the Chinese Securities Regulatory Commission, pointed out yesterday in his keynote speech that the QFII and RQFII currently only account for 1.5% to 1.6% of the A-share market in China. He hopes that the size will expand around 9 to10 times in the future.
**Qianhai—a testing ground for RMB & Hong Kong **
In addition to RQFII, another new initiative gaining attention is Qianhai, a special zone in Hong Kong's neighboring city Shenzhen designed particularly to experiment RMB currency convertibility. Chinese policy makers recently unveiled detailed rules on cross-border renminbi loans, allowing companies in Qianhai to borrow money from Hong Kong banks.
“It’s not just about money flowing back. It’s about Hong Kong as an offshore RMB center, Fung said. “We definitely think Qianhai would provide a new initiative on how to build the base (of RMB) in Hong Kong and forge a closer line between Hong Kong and Shenzhen and in the wider perspective between Hong Kong and Guangdong province
In terms of the market concern whether Hong Kong can provide enough liquidity pool to sustain Qianhai’s development, Julia Leung, undersecretary for Financial Service and the Treasury of the city's government, said the size of liquidity in Hong Kong is dynamic in nature and it may change and respond to changing market conditions. “If there is more demand, the supply will subsequently increase, she said.
She added that the liquidity pool is also policy-driven and her department has been working closely with the mainland counterparts on new initiatives to facilitate smooth outflows and inflows of renminbi.
Fung voiced similar optimism, citing HSBC’s meeting in Beijing last December when Chinese government and regulators vowed to support sustainable growth of the liquidity pool in order to develop Hong Kong as the leading offshore Renminbi market.
“The industry would not be surprised on more forthcoming opening-up measures to encourage the two-way flow of RMB, not only in trade but also in investment and capital account related," Fung said. “We need to keep it going and cannot be complacent, but we have all the infrastructure underlying to support.
Hong Kong became the first offshore market to launch renminbi deposit-taking business in 2004. Since then its RMB business has been developing significantly in a wide range of areas, including currency exchange, remittance, credit and debit cards, trade settlement, dim sum bond issuance and trading, as well as RMB denominated IPO and stock trading.
Data shows Hong Kong's renminbi deposit grow dramatically to around 570 billion yuan from the initial 30 billion. RMB loans have also surged to over 100 billion yuan from the initial 2 billion in the first year of launch.
