HONG KONG - China will allow the sale of yuan-denominated financial products in Hong Kong and lift a cap on the purchase of yuan by corporations in the city to meet growing demand for the Chinese currency, newspapers said on Tuesday.
The Hong Kong Monetary Authority (HKMA) and People's Bank of China will sign an amendment on a yuan clearing agreement on July 19 allowing individuals and companies to transfer yuan in their accounts between banks, facilitating investments in yuan products, Ming Pao Daily reported.
China has used yuan trade settlement as a starting point to gradually internationalise the currency. Its central bank recently said it was extending the yuan trade settlement scheme to 20 provinces, autonomous regions and municipalities in China and all overseas nations and regions.
Under the amended agreement with Hong Kong, fund managers can sell yuan funds, brokers can trade yuan shares and yuan bonds and insurance companies can provide yuan-denominated products in the city, the newspapers said.
"We are striving to complete an amendment of the agreement within this month," a HKMA spokeswoman said. But she declined to comment on the newspaper reports.
The major breakthrough in the latest agreement will be a lifting of the cap for companies buying yuan in Hong Kong, which will greatly increase the circulation of yuan outside Chinese mainland, Ming Pao said.
But individuals are still subject to the restriction of exchanging no more than 20,000 yuan ($2,949.77) per day, it added.
As a pilot location for the yuan's globalisation, Hong Kong has been allowed to settle cross-border transactions in the yuan since last year. But the business only took off after the HKMA in February announced a range of measures allowing banks to conduct more business in the yuan for corporate clients in Hong Kong and permitted local companies to issue yuan bonds.
Yuan settlements in Hong Kong reached 7.16 billion yuan in May, up from 2.98 billion yuan in April and 2.53 billion yuan in March.