HK: Where's the 'Outlet' for RMB 70 Billion?

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Last updated at: (Beijing Time) Thursday, August 14, 2003

HK: Where's the 'Outlet' for RMB 70 Billion?

Stepping into shops in HK, tourists from the motherland can freely use RMB or RMB credit cards issued by domestic banks. Some tourists may be curious for two questions: How will HK businessmen deal with the received RMB or how will they clear the account of credit cards? How such a huge RMB can flow back to the motherland?

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Along with the countdown for the carrying-out of the "Beijing and Shanghai residents apply for personal tour-certificate to Macao and Hong Kong by Identity Card and resident's registration", more and more tourists from the motherland will pour into HK. The initial travelers will possibly feel puzzled as to how to carry on the tour. But stepping into shops in HK, they can freely use RMB or RMB credit cards issued by domestic banks. Some tourists may be curious for two questions: How will HK businessmen deal with the received RMB or how will they clear the account of credit cards? How such a huge RMB can flow back to the motherland?

A Team From CASS Will Go to HK for Investigation by the End of Aug

As a matter of fact, the currency of RMB has remained mysterious for a long time in HK. So, Tung Chee Hwa, Chief Executive of Hong Kong Special Administrative Region (HKSAR) has announced recently that there will be four important adjustments in the financial aspect according to the Closer Economic Partnership Arrangement (CEPA) and the Central Government will take precedence to establish the offshore business center in HK. This means that there will be a more reasonable and more transparent currency channel for RMB to circulate in HK.

According to the news of Aug 10, Li Yang (Director of Financial Research Institute under Chinese Academy of Social Science (CASS)), Yi Xianrong (a researcher of the Institute) and other specialists will lead a research team and leave for HK on Aug 24. The key job for them is to investigate and study how to open up RMB business in HK and seek for a theoretic framework for the detailed rules and regulations for the cooperation between the mainland and HK. Meanwhile, the officials of China Banking Regulatory Commission (CBRC), China Securities Regulatory Commission (CSRC) and the People's Bank of China will meet with those of Hong Kong Monetary Authority, Securities & Futures Commission and Hong Kong Exchange & Clearing Ltd. in Hong Kong. However, One thing for certain is that the preparatory work of setting up the RMB offshore center in Hong Kong is being carried out in an intensified way.

RMB Flow Volume in Hong Kong to Be Close by 70 Billion

"In fact, RMB has become the second largest exchange currency next only to Hong Kong dollars." Having working in Hong Kong for a long time, Yi Xiangrong says, "there is no foreign exchange control in Hong Kong. In the past, Hong Kong residents were more like to carry HKD and USD in their pockets, and now they begin to take some RMB instead. After all, the interest rate of RMB is higher than that of HKD and some Hong Kong residents hope the RMB to increase in value."

As the RMB in Hong Kong can only be used and exchanged in shops and among business institutions, it is difficult to count up the accurate amount. According to the relative statistics, Hong Kong totally hosted 18.9 million tourists coming from the mainland from 1996 to 2001. While in Hong Kong, if every traveler only used half of the RMB 6,000 yuan permitted to bring out when leaving the mainland, there will be at least RMB 57 billion yuan in Hong Kong's market now. According to a report issued by UBS Warburg, the stable amount of RMB in Hong Kong's market is about 50-70 billion yuan. What's more, along with the reification of the numerous items of CEPA, the RMB currency flow from the mainland to Hong Kong will increase greatly. According to calculation of UBS Warburg, if tourists from the mainland are assumed to increase by 50 percent in 2002 and increase 15 percent in every successive year and the average expenditure is 3,000 yuan, there will be 157 billion yuan in Hong Kong's market by the year of 2005.

Why the HK Banking Circles Set Great Store on RMB Business

Former President of China Region of Standard Chartered Bank Huang Yuanhui has even calculated the generous profit. Given the counting of the RMB 30 billion yuan in the market and if it can be brought into Hong Kong's banking system at a fee rate of 1 percent, there will be a profit of 0.3 billion yuan only in the aspect of absorbing deposit. USB Warburg further points out that if Hong Kong can become the offshore center of RMB, Hong Kong's banking circles can earn 2.6 billion yuan from the business, taking up about 4 percent of the yearly profit of the banking circles.

Before finishing the interview, Yi Xianrong affirmatively expresses that relaxing the restrictions of HK banks' RMB business is only a smaller step towards the establishment of the RMB offshore center in HK. According to him, should the four important adjustments can one day be realized in the financial aspects of CEPA, i.e. (to allow Hong Kong banks try out personal RMB business, including the business of deposit, remittance, exchange and credit cards; to permit to take preferential consideration on opening the RMB offshore business in Hong Kong when the conditions are mature; the proportion of 15 percent that a Hong Kong insurance company can hold the share of an insurance company in the mainland can be raised after further discussion and research; the qualified mainland enterprises are actively supported as always to list at the HK stock market) this will offer an absolutely new chance for the development of Hong Kong.

By PD Online Staff Liu Wei

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