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Financial institutions were set to maximize Hong Kong's advantage as the largest offshore renminbi (RMB) center in the world.
The banking industry believed the Belt and Road Initiative as well as the bond connect program would bring game-changing opportunities for institutional investors.
With a vastly expanded RMB pool, Hong Kong remained a top global financial hub. But Samuel Tong, deputy chief executive of the Industrial and Commercial Bank of China, said the offshore RMB market was still relatively small, which made Hong Kong more prone to volatility.
"The market is rather small in this respect, we are aware that the market has been shrinking in the past one or two years. In the past the total offshore RMB market in the world was around two trillion, and half of it was in Hong Kong, but in the past one year or so, the market size has shrunk by some 50 percent, meaning that the latest deposit balance of Hong Kong is down to 500 billion," said Tong.
The value of the yuan was among investors' concerns. The Chinese currency weakened more than 6 percent against the US Dollars last year, but analysts said the yuan had stabilized.
"I think the RMB is going to stabilize in current level, with a range of 3 percent. The reason for a sharp devaluation of RMB in the past three years was mainly due to a strong dollar. In fact the Dollar Index has gone up by 25 percent in the past three years. However the Chinese economy has stabilized and the growth has gone back up to 6.9 percent in the first quarter of this year,” said Tommy Ong, manager director of DBS Wealth Management.
Ong stated that if RMB cross-border trade settlement and investment were the first step of yuan globalization, the RMB's next destination probably is to be a pricing currency, and afterwards it will become a reserve currency.
In the future, the Belt and Road Initiative as well as the bond connect program are anticipated to bring game-changing opportunities for institutional investors.
"The biggest opportunity now we have is bond connect, overseas investors would allow to be invested in the domestic markets, and that again will create fresh demand for the RMB and that will help stabilize and increase the value of the RMB," noted Tong.
(CGTN)
