The Hong Kong Monetary Authority is developing its clearing and settlement platform in preparation for a potential increase in cross-border capital flows through funds eligible for mutual recognition.
It is necessary to ensure a wide, safe and sound channel for the settlement of such traffic even though the volume may not surge in the early stages, as in the initial stages of Shanghai-Hong Kong Stock Connect, the Hong Kong Economic Journal reported Wednesday, quoting the de facto central bank’s chief executive, Norman Chan Tak-lam.
Chan expects a higher demand for renminbi liquidity in the city amid a slew of developments involving the use of the Chinese currency.
These developments include the People’s Bank of China allowing offshore banks to conduct repurchase transactions in the mainland interbank market with the use of qualified bonds issued in the mainland, he said.
The move helps safeguard the interest rate of the offshore renminbi, given that it can serve as a means to replenish short-term renminbi liquidity, Chan said.
Hong Kong’s status as an offshore renminbi hub will be boosted by the arrangement, he said.
Chan noted that savings in renminbi made up about 11 percent of the city’s total savings in April, compared with just 1.1 percent in 2009.
Translation by Vey Wong
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