CY Leung applauds HK Renminbi offshore trading's decade milestone

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Hong Kong Chief Executive CY Leung said on Monday that Jan. 2014 marks the commencement of the 10th year of Renminbi offshore trading business of the city. It is of utmost importance for the city to maintain its leadership in trading the popularizing currency.

Leung said at a public forum in Hong Kong that back in January 2004, Hong Kong banks started offering the first ever personal Renminbi banking services outside the Chinese mainland.

Today, Hong Kong is the largest offshore Renminbi financing centre in the world. Meanwhile, yuan has become one of the top 10 most traded currencies internationally.

With the largest pool of Renminbi liquidity outside the Chinese mainland and a wide range of offshore Renminbi investment products, Hong Kong serves as a highly effective market-to-market connector for offshore Renminbi business.

He said, according to SWIFT(Society for Worldwide Interbank Financial Telecommunication) four out of every five yuan traded offshore are traded in the territory.ItsRMB Real Time Gross Settlement (RTGS) system handles an average daily turnover of around RMB 400 billion everyday on an average. The operating hours of the RMB RTGS system have been extended to 15 hours, giving financial institutions in the European time zone an extended window to settle offshore Renminbi payments through the Hong Kong infrastructure.

Among several new initiatives last year, the Treasury Markets Association of Hong Kong launched the CNH Hong Kong Interbank Offered Rate fixing to support the further growth of the offshore Renminbi interest rate market. CNH HIBOR fixing provides a reliable benchmark for pricing loan facilities. The fixing also facilitates the development of a variety of RMB interest rate products, assisting market participants to hedge the interest rate risk of their RMB businesses.

Leung noted that China's currency liberalisation is not just a national or regional trend; it is a truly global trend. Hong Kong is the main conduit for the flow of Renminbi capital and, perhaps more importantly, the flow of information on developing and expanding Renminbi business around the world.

To help enhance co-operation between Hong Kong and other overseas markets on the development of Renminbi business, Hong Kong has established a number of private-sector platforms for collaborating with other places such as London, Paris, Australia and more recently with Malaysia.

The latest figures from January to November 2013 show that Hong Kong accounts for over RMB 3 trillion worth of offshore Renminbi trade settlement. The value of Renminbi deposits and certificates of deposits in Hong Kong exceeded RMB 1 trillion as at the end of December 2013. Since 2007, more than 330 Renminbi bonds have been issued in Hong Kong, with a total outstanding amount of RMB 309 billion.

Apart from yuan trading, the Hong Kong chief also remarked the important legislative amendments concluded in 2013, to sharpen the competitiveness of the city's financial services sector, such asamending tax laws to promote Hong Kong's development as a platform for Islamic finance.

Under the tax amendment, Leung said, Islamic bonds, or sukuk, can enjoy equal treatment to conventional bonds in terms of tax and stamp duty. We look forward to promoting Islamic finance, not just to cater for Muslim investors but also to attract growing numbers of international investors who see the benefits and opportunities of Islamic finance.

In the mean time, reforms to Hong Kong's trust law also came into effect last month. Modernising our trust law will help to develop the trust services industry in Hong Kong and make Hong Kong stand out as a very attractive and competitive asset management centre. Among other things, the reform facilitates trust administration, abolishes the restriction on the time limits of trusts and gives better protection to beneficiaries.