FSDC Report丨Enhancing HK’s Status as Offshore RMB Business Hub

Editor's Note

Financial Services Development Council released report Enhancing Hong Kong’s Status as Offshore RMB Business Hub. Professor Shusong Ba is the working group leader. The group members are Ms Ding Chen, Mr Liu Shihong, Mr Shen Hua, Mr Du Yang, Mr Esmond LEE, Ms Li Ting, Mr Bai Haifeng and Dr Ba Qing.

Author: Financial Services Development Council, Hong Kong

REPORT SUMMARY

Renminbi (“RMB”) internationalisation has seen remarkable progress since its commencement in 2009. Global capital has shown a huge demand for RMB assets following the inclusion of the RMB in the Special Drawing Rights (“SDR”) currency basket of the International Monetary Fund (“IMF”) in 2016, the inclusion of A-shares in the MSCI Emerging Markets Index in 2018 and the inclusion of Chinese bonds in the Bloomberg Barclays Global Aggregate Index in 2019. It is clear that offshore investors are increasing their holdings: at present, more than 60 countries and regions have included RMB in their foreign exchange reserves, and more central banks have expressed their intention to invest in RMB assets. 

Banks in Hong Kong began providing RMB services to individual customers in 2004. In 2009, the Pilot Scheme for Settlement of Cross-border Trade in Renminbi was launched, followed in subsequent years by other schemes including the Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect and the Bond Connect. With the support of the Central Government, Hong Kong has gradually developed into the world's largest offshore RMB business hub, with over 70% of global offshore RMB payment transactions currently handled in Hong Kong. At the same time, Hong Kong owns the deepest offshore RMB capital pool in the world and provides the broadest spectrum of offshore RMB investment products around the globe. Thanks to the strengths of Hong Kong as an RMB hub, China Development Bank issued the first offshore RMB bonds in Hong Kong as early as in 2007, and the Ministry of Finance has also issued RMB bonds in Hong Kong for 11 consecutive years since 2009. These developments have strengthened the depth and breadth of the offshore RMB asset market in Hong Kong. They have also laid a solid foundation for RMB internationalisation and the two-way opening of the Mainland capital market, enhancing the interconnection of domestic and overseas financial markets. 

China’s financial markets are reforming and opening up to the world, creating significant development potential for the RMB asset market. Amidst such progresses, Hong Kong is well placed to capitalise on the potentials as the world's leading offshore RMB business hub. In the National 13th Five-Year Plan, the Central Government highlighted that Hong Kong’s position as a global offshore RMB business hub should be strengthened. The Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area (“Outline Development Plan”), published in 2019, also proposed a gradual expansion of the scale and scope of the cross-boundary use of RMB in the Greater Bay Area (“GBA”) and the continued development of the offshore RMB businesses in Hong Kong. The financial services industry in Hong Kong must prepare to embrace these unprecedented opportunities. 

FULL REPORT

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Source: Financial Services Development Council, Hong Kong, May 2020

Editor: Wu Yifan, Zhang Qihang