Hong Kong plays a significant role in enhancing renminbi internationalization as it makes strides to become a fixed-income and currency center, said Charles Li Xiaojia, chief executive of Hong Kong Exchanges and Clearing, the operator of the Hong Kong bourse.
“As the renminbi comes out of the massive onshore market, moving into the global stage, we need to find a way to either build, or partner or through joint ventures or introduce infrastructure in Hong Kong,” Li said at HKEX’s online Fixed Income and Currency Conference 2020 on Tuesday.
As the renminbi comes out of the massive onshore market, moving into the global stage, we need to find a way to either build, or partner or through joint ventures or introduce infrastructure in Hong Kong
Charles Li Xiaojia,
Chief executive of Hong Kong Exchanges and Clearing
Hong Kong needs to provide that foundation of services that are currently still missing in the city, he added.
“It is also precisely at this sort of time of stress that it is also a great opportunity for us to begin to allow a greater level of liberalization and opening up and allow (the) renminbi to find ways down to the global center stage,” Li noted.
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As the world’s second-largest economy with the biggest population, the Chinese mainland has a huge fixed-income and currency market, and the renminbi needs to play a greater and much more important strategic role, Li said.
Amid the COVID-19 pandemic, the Federal Reserve and US Treasury have taken unprecedented steps to flood the market with liquidity, which increased deficits in finance and currency supply, Li said. He added the market today has never seen this much US dollar liquidity.
“It’s absolutely legitimate for people to ask whether or not this is something sustainable,” Li said. In the future, the global market would wonder if it should be singularly dependent on the US dollar system and whether, over time, a strategic alternative needs to be discovered, he said.
Li said the renminbi will play a more significant role in the global financial market in the process of its internationalization.
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Last week, the onshore and offshore yuan jumped to its highest level against the US dollar since May 2019. The offshore yuan gained over 1 percent over the last week, from above 6.83 to 6.75 on Monday.
“However, (the) USD/CNY (rate) should consolidate in coming weeks, partly as US election uncertainty tempers yuan gains,” analysts at Westpac wrote in a note.
