Macao gets green light for RMB services
Macao and mainland banking officials yesterday signed an agreement which will allow the special administrative region to launch renminbi business.
The memorandum was signed in Macao yesterday by People's Bank of China Vice-Governor Li Ruogu and Macao Monetary Authority Chairman Teng Lin Seng.
The nation's central bank has also pledged to provide all necessary services to Macao commercial banks approved to provide yuan-denominated services.
The move is aimed to meet the need generated by growing cross-border travel and business exchange between the Chinese mainland and the region, which returned to the motherland in 1999.
The central bank said it will "provide a clearing channel and mechanism for banks in Macao to conduct personal renminbi business."
The central bank said it would consult with the Macao Monetary Authority and designate a clearing bank for the purpose.
Macao commercial banks operating yuan business will be allowed to provide deposits, remittance, credit card and exchange services for local residents. But they cannot provide yuan-based loans.
The central bank's statement devoted special attention to the implications that yesterday's agreement will have on the region's gambling industry, a mainstay of the local economy.
Although mainland residents will be able to use renminbi-based credit cards in Macao when local banks can provide yuan services, these credit cards cannot be used in casinos.
In addition, mainland residents can only withdraw less than 6,000 yuan (US$720) when they travel overseas.
So the change "will not encourage mainland people to gamble in Macao," the statement said.
The arrangement between the central bank and the Macao Monetary Authority is similar to the one made earlier this year between the mainland and Hong Kong, whose commercial banks started to conduct yuan-denominated business earlier this year.
BOC Hong Kong Holdings Ltd, the Beijing-based Bank of China's Hong Kong subsidiary, is the clearing bank for this.
But it remains unclear who will become Macao's clearing bank. The statement did not specify when yuan-denominated business will be officially launched in Macao.
Yesterday's agreement will provide an official channel for renminbi banknotes circulating in the region to flow back to the mainland.
The yuan is becoming increasingly popular in Macao after the handover in 1999.
It was used well before 1999 in places like gold shops, said Wan Sin Long, director of the Banking Supervision Department at the Monetary Authority of Macao.
Now it is being used anywhere, such as department stores and taxis, he said.
The renminbi is fully convertible under the current account, but only partly convertible under the capital account.
Although the annual inflow of renminbi banknotes, as recorded by conversion into the local currency, the pataca, is estimated at only 2-3 billion yuan (US$240-360 million), tiny as compared to the figure in Hong Kong, the volume is expected to increase as cross-border travel and business exchanges with the mainland grow, Wan said.
Allowing Macao banks to conduct renminbi business will not only facilitate exchanges between the two sides, but strengthen banking supervision and protect the reputation of renminbi, Wan said.
Underground money exchange is now an everyday scene in Macao. So the move to bring this money into official channels will crack down on these illegal dealings.