HONG KONG: The People's Bank of China (PBOC) and the Hong Kong Monetary Authority (HKMA) Monday signed a supplementary Memorandum of Co-operation to prepare for the implementation of a Renminbi trade settlement pilot scheme.
Speaking after the signing ceremony in Hong Kong, Zhou Xiaochuan, the governor of PBOC, said the State Council had given the green light for RMB trade settlement services to be provided in the special administrative region.
"Once the relevant administrative rules on the mainland are promulgated, banks in Hong Kong will be able to provide related services to enterprises using RMB to settle trade transactions with their counterparts on the mainland," the Hong Kong Monetary Authority, the de facto central bank of Hong Kong, said in a statement.
The mainland authorities announced in early April that Shanghai and four cities in the Guangdong Province had been selected for a cross-border RMB trade settlement pilot scheme.
Zhou said the PBOC and the HKMA had been working closely on the implementation of the pilot scheme, including the related arrangements for the cross-border settlement and clearing of RMB funds and amendments to the existing legal documents.
The two central banks have previously signed Memorandum of Co- operation as early as 2003 on RMB clearing services sought after by individuals in Hong Kong.
Authorities would still need to work on details after the signing of the agreement Monday, including the signing of agreements between PBOC, the clearing banks and banks participating in the pilot scheme, HKMA Chief Executive Joseph Yam said.
Yam said he expected the first RMB trade settlement to come in July.
John Tsang, the Financial Secretary of the Hong Kong Special Administrative Region (HKSAR) government, said the pilot scheme would not only strengthen the role of Hong Kong as a testing ground for the use of RMB outside the mainland, but was also conducive to trade activities and economic development in the two places.
"This will also provide Hong Kong enterprises with more flexibility in their operations, and is complementary to the policy initiatives of the Government to assist them in withstanding the impact of the international financial crisis," he said.
Yam said the pilot scheme, once implemented, would help further diversify RMB business in Hong Kong and enhance the capability of Hong Kong financial system in handling RMB-denominated transactions.
"I hope that RMB business in Hong Kong will continue to develop, consistent with the policy direction of further developing a mutually-assisting, complementary and interactive relationship between the financial systems of the mainland and Hong Kong."
"This is of strategic importance," he said.