HK banks to open RMB services ( 2003-08-12 07:18) (China Daily)
Hong Kong banks will open their renminbi services in the near future,
according to a Beijing-based newspaper.
The Business Post Monday quoted unidentified banking sources as saying
representatives from the central People's Bank of China and the China Banking
Regulatory Commission will go to the Hong Kong Special Administrative Region
next month to consult with local officials on the scope of the services -- which
may include deposits, remittance, exchange and credit card services -- and the
mechanism for currency flowing back to the Chinese mainland.
The central bank said earlier it had been working on rules in relation to
opening the services since last year and had been conferring with related
government agencies.
Research by investment bank UBS estimates the value of renminbi in Hong Kong
to be over 57 billion yuan (US$6.9 billion). It is expected to reach 157 billion
(US$19 billion) by 2005.
Yi Xianrong, a researcher with the Chinese Academy of Social Sciences, said
most of the renminbi in Hong Kong is now circulating through underground
exchanges.
The transactions could be part of illegal activities such as money
laundering, he said.
The opening of personal renminbi business will channel the cash in the "grey
area" into an official system, Yi said.
"This will also cut the cost of renminbi-related transactions and will help
strengthen the regulation of these transactions," said Yi, who is part of a team
conducting research on banking co-operation between the mainland and the special
administrative region.
Zong Liang, a researcher with the Bank of China's International Finance
Institute, said a key issue in opening the services is settlement, which
requires co-ordination from the authorities.
The efficiency of settlement will influence the renminbi's return to the
mainland, Zong said.
The Hong Kong Monetary Authority was reported to be willing to act as the
settlement bank
Zhong Wei, a professor with Beijing Normal University, suggests a
mainland-backed bank should be designated as the settlement house for other Hong
Kong banks conducting renminbi business.
The prospect of Hong Kong banks engaging in renminbi business also prompted
discussion about the region's chances of becoming a centre for offshore finance
in renminbi. But Yi said that was still far away.
Offshore finance refers mainly to banking business operating outside the
official territory of a currency.
Yi said the prerequisite for forming an offshore centre for a currency was
the full convertibility of the currency.
When a currency is not convertible under the capital account -- as the
renminbi is at the moment -- it is impossible to carry out loan business in the
currency, Yi said.
