From basic renminbi deposit and exchange to the first renminbi-denominated securities listed on the Hong Kong stock market, the offshore renminbi business in the Hong Kong Special Administrative Region (SAR) has been growing steadily over the past seven years.
With the capital pool gradually forming and the investment products diversifying, the fledgling offshore market marks a further step toward internationalization of the renminbi.
At the same time, Hong Kong has also benefited from the offshore business: Its capital market has developed rapidly as it has seized the chance to grab commercial opportunities. It is widely believed that the offshore renminbi business is essential for Hong Kong's future as a financial center.
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A revised Settlement Agreement on the Clearing of Renminbi Businesses was signed in July 2010, removing the restrictions on Hong Kong banks in opening renminbi accounts and providing related services. One month later, Hong Kong's clearing banks were allowed to start participating in the interbank bond market in the Chinese mainland.
Based on these symbolic breakthroughs, the offshore renminbi business in Hong Kong is growing steadily amid the various policies introduced by the People's Bank of China and the Hong Kong Monetary Authority (HKMA).
HKMA data shows that renminbi deposits in Hong Kong were 451.4 billion yuan ($69.4 billion) as of March this year, while the total renminbi remittance for cross-border trade settlement jumped 32 percent from February to March.
Peter Pang, deputy chief executive of HKMA, said in late March that the offshore renminbi market in Hong Kong is gradually forming, driven by the interaction of renminbi trade settlement, financing and asset management.
Charles Li, the chief executive of Hong Kong Exchanges and Clearing, said earlier that in the formation stage of the offshore renminbi market, the commercial benefits will be relatively limited, as the products are low yield such as insurance and mutual funds. However, they will encourage financial institutions to develop new renminbi products or services, and as the infrastructure is improving, more products will find their way into the market, laying a solid foundation for Hong Kong to become the offshore renminbi business center.