Hong Kong banks will open their renminbi services in the near
future, according to a Beijing-based newspaper.
The Business Post Monday quoted unidentified banking
sources as saying representatives from the central People's Bank of
China and the China Banking Regulatory Commission will go to the
Hong Kong Special Administrative Region next month to consult with
local officials on the scope of the services -- which may include
deposits, remittance, exchange and credit card services -- and the
mechanism for currency flowing back to the Chinese mainland.
The central bank said earlier it had been working on rules in
relation to opening the services since last year and had been
conferring with related government agencies.
Research by investment bank UBS estimates the value of renminbi
in Hong Kong to be over 57 billion yuan (US$6.9 billion). It is
expected to reach 157 billion (US$19 billion) by 2005.
Yi Xianrong, a researcher with the Chinese Academy of Social
Sciences, said most of the renminbi in Hong Kong is now circulating
through underground exchanges.
The transactions could be part of illegal activities such as
money laundering, he said.
The opening of personal renminbi business will channel the cash
in the "grey area" into an official system, Yi said.
"This will also cut the cost of renminbi-related transactions
and will help strengthen the regulation of these transactions,"
said Yi, who is part of a team conducting research on banking
co-operation between the mainland and the special administrative
region.
Zong Liang, a researcher with the Bank of China's International
Finance Institute, said a key issue in opening the services is
settlement, which requires co-ordination from the authorities.
The efficiency of settlement will influence the renminbi's
return to the mainland, Zong said.
The Hong Kong Monetary Authority was reported to be willing to
act as the settlement bank.
Zhong Wei, a professor with Beijing Normal University, suggests
a mainland-backed bank should be designated as the settlement house
for other Hong Kong banks conducting renminbi business.
The prospect of Hong Kong banks engaging in renminbi business
also prompted discussion about the region's chances of becoming a
center for offshore finance in renminbi. But Yi said that was still
far away.
Offshore finance refers mainly to banking business operating
outside the official territory of a currency.
Yi said the prerequisite for forming an offshore center for a
currency was the full convertibility of the currency.
When a currency is not convertible under the capital account --
as the renminbi is at the moment -- it is impossible to carry out
loan business in the currency, Yi said.
(China Daily August 12, 2003)