A businessman walks past a poster advertizing the yuan currency. Hong Kong Monetary Authority, the city's de facto central bank, will allow non-residents in Hong Kong to buy unlimited amounts of yuan in the city, to further boost the yuan business. Laurent Fievet / AFP

Non-residents in the city get green light to buy unlimited renminbi

Hong Kong non-residents can buy unlimited amounts of the yuan in the city from next month, in a move to expand the yuan business further, the city's de facto central bank said.

Effective Aug 1, 2012, non-residents, who do not hold Hong Kong identity cards, will not be subject to the daily conversion limit on the yuan amounts they buy, distinguishing them from the city's residents who are still capped by the 20,000 yuan daily conversion quota, Hong Kong Monetary Authority (HKMA) announced.

The latest move aims to broaden the scope of yuan business services in the city and strengthen the city's status as the primary offshore yuan center, Eddie Yue, deputy chief executive of the HKMA said at a media briefing on Wednesday.

Liao Qun, chief economist of the China Banking Group at Citic Bank International, said the relaxation on non-Hong Kong residents opening a yuan account is " definitely a positive move" for the city, and it is likely to help boost the yuan deposit business in Hong Kong.

"It is also good news for banks in Hong Kong as it will bring in more clients and diversify the business of the local banks," said Liao.

Moody's Senior Analyst Ivan Chung expected visitors from mainland to benefit the most under the new policy as they will prefer to open yuan accounts in Hong Kong to diversify their investment portfolios.

Chung added that there maybe an influx of investors from adjacent southeast Asian countries who may open yuan accounts in Hong Kong to participate in the yuan business.

With hopes for the yuan's appreciation fading in the city, Hong Kong's yuan deposits declined to 553.9 billion yuan as at the end of May, down 11.7 percent from the peak of 627.3 billion yuan registered in November last year.

At the same time, Hong Kong is facing stiff competition from Singapore and London, which are also positioning themselves as offshore yuan centres. Since the two cities do not have restrictions on the identity of a person doing yuan business, the new measures will bring Hong Kong on par with other international financial centers, said Ngan Kim-man, head of yuan strategy & planning at Hang Seng Bank.

However, the cross-border flow of yuan funds will still be restricted by the rules and requirements set by the mainland or other jurisdictions in different cases, according to the HKMA.

Ngan said the new measure would have a less positive effect in boosting the yuan liquidity pool in Hong Kong. Even if mainland residents are allowed to open yuan accounts in Hong Kong, the restrictions on direct cross-border remittance still remains hindering the expansion of the deposit pool, he explained.

Meanwhile, the daily transfer quota that allows Hong Kong residents to send a maximum 80,000 yuan to mainland banks will remain in place, HKMA said on Wednesday.

Despite the existing restrictions for Hong Kong residents on yuan conversions and transfers, current practices are believed to be sufficient to meet their demands for yuan business in Hong Kong, Carmen Chu, executive director from HKMA said at the media briefing on Wednesday.

Contact the writers at litao@chinadailyhk.com

(HK Edition 07/26/2012 page2)