Published: 16:20, June 12, 2023 | Updated: 21:35, June 12, 2023
Chan: HK to play unique role in RMB internationalization
By Li Xiaoyun in Hong Kong

This undated photo shows Financial Secretary Paul Chan Mo-po giving an interview. (ZOU HONG / CHINA DAILY)

Hong Kong will play a unique role in renminbi internationalization with the deepening of its stock connectivity with the Chinese mainland and the introduction of a Hong Kong dollar-renminbi (HKD-RMB) dual counter model, Financial Secretary Paul Chan Mo-po said in his official blog on Sunday.   

As of April, Hong Kong’s RMB deposits were close to 1 trillion yuan ($140 billion), making it the world’s largest offshore RMB pool.

“To fulfill renminbi’s functions in international payments, investments and currency reserves, the special administrative region government is working at full speed to enrich its asset options, which is expected to boom the offshore RMB ecosystem,” Chan said.  

The HKD-RMB dual counter model, which will be officially launched by the Hong Kong Exchanges and Clearing Limited on June 19, will enable an initial batch of 24 stocks to trade in both Hong Kong dollar and RMB

The HKD-RMB dual counter model, which will be officially launched by the Hong Kong Exchanges and Clearing Limited on June 19, will enable an initial batch of 24 stocks to trade in both Hong Kong dollar and RMB. 

The average daily turnover of the 24 stocks, covering businesses in internet, finance and real estate, together account for around 40 percent of the total of Hong Kong stocks, which is projected to enrich the investment choices of offshore RMB holders in Hong Kong and elsewhere around the world. 

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“The number of shares that can be traded under the dual counter model will be increased in a stepwise manner,” the financial chief added.

According to Chan’s blog, Hong Kong will promote the inclusion of the RMB-denominated securities into the Southbound Scheme, under which eligible mainland investors can directly trade Hong Kong stocks with onshore RMB and the exchange risks can be reduced accordingly. 

In addition to the upcoming launch of the dual counter model, the Stock Connect mechanism has achieved fruitful results over the past year. Exchange Traded Funds, for instance, were included last July in the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect, providing domestic and foreign investors with more diversified asset allocation options.

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Chief Executive John Lee Ka-chiu announced earlier that the average daily turnover of the Northbound Trading reached 240 million yuan in April, up more than 11 times from that for the first month of its launch, while the turnover of the Southbound Trading was HK$1.96 billion ($250 million), eight times higher than when it was first launched in 2021.       

Also, with the additional issuance of a new 10-year RMB tranche, the Hong Kong government successfully offered close to $6 billion worth of green bonds earlier this month, of which RMB bonds accounted for 15 billion yuan, a 50 percent increase from that for January, which is conducive to extending the yield curve of offshore RMB and further diversifying the choices of offshore RMB products.  

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As of the first quarter of this year, the share of renminbi in mainland cross-border payments and receipts has climbed to 48 percent, surpassing the US dollar for the first time as the most common currency for cross-border transactions in the Chinese mainland.

It is vital for Hong Kong to seize the historical opportunities created by the accelerated globalization of the renminbi, Chan said, revealing that “the Securities and Futures Commission, the Hong Kong Monetary Authority and the HKEX are cooperating with the mainland counterparts to study the launch of treasury bond futures in Hong Kong, and further improve RMB financial infrastructure in the offshore market.”