China will create further opportunities for renminbi-related businesses with plans to open more free trade zones, a bank executive said.
These plans are being driven by growing demand for such hubs and by increased potential for interest rate arbitrage, the Hong Kong Economic Journal reported Monday, citing Wang Haixia, deputy general manager for corporate banking and financial institutions of BOC Hong Kong (Holdings) Ltd. (02388.HK).
Hong Kong lending rates are still lower than those in the mainland despite a series of rate cuts by the Chinese central bank, she said.
Wang said the Shanghai free trade zone, launched in 2013, coupled with easier access to cross-border loans, has been attracting businesses.
BOC Hong Kong sees more opportunities in the upcoming free trade zones in Guangdong, Fujian and Tianjin.
It will leverage its ability to offer two-way cross-border financing through its parent, Bank of China Ltd. (03988.HK), Wang said.
He said the effects of a narrowing interest spread between Hong Kong and mainland China will not be felt anytime soon.
Even if China fully opens its capital account, it will maintain some restrictions on cross-border capital flows, BOC Hong Kong senior economist Ying Jian said.
China’s interest rates don’t follow those in the United States, so the gap with Hong Kong, whose interest rates are dictated by its currency link to the greenback, will remain for the forseeable future, Ying said.
BOC Hong Kong has signed 1.8 billion yuan (US$289.6 million) worth of strategic and lending agreements with nine companies since the three additional free trade zones were announced.
Translation by Vey Wong
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