OREANDA-NEWS. November 02, 2012. The Bank of East Asia (“BEA”) has released the October 2012 issue of Economic Analysis. According to the Bank’s quarterly economic report, ensuring both financial stability and financial innovation continue to be the dual missions for Hong Kong in the development of Renminbi (“RMB”) internationalisation, reported the press-centre of BEA. 

China has been actively promoting the internationalisation of the RMB in recent years. Hong Kong’s pool of top financial talents and its close economic relationship with the Mainland contribute to the city’s function as a testing ground for RMB internationalisation. Moreover, Hong Kong’s role as a major offshore RMB centre has become the key plank in China’s 12th Five-Year Plan.

To develop into a full fledged offshore RMB centre, Hong Kong needs to serve not only its existing business activities with the Mainland, but also to attract RMB funds from overseas. The successful development of RMB business in other regions such as London, Singapore, and Taiwan will not pose competition to Hong Kong. On the contrary, it will enlarge Hong Kong’s catchment area for RMB financial services, which is crucial to the city’s development in the future.

Although there has been a slowdown in RMB deposit growth in Hong Kong over the past year, the variety and number of RMB products available have actually grown, leading to a more balanced development for RMB assets and liabilities.

To further nurture RMB internationalisation, global investors must be attracted to hold the currency. Most international investors currently hold mainstream currencies such as the US Dollar, which are supported by well-developed financial products and services. To convince these investors to switch to holding RMB, a comparable class of RMB financial services must be provided. As China’s major offshore RMB centre, Hong Kong needs to build sufficient RMB product diversity and achieve critical market volume to service the demand from global funds. There is still a long way to go before Hong Kong reaches this stage.

Since offshore RMB services involve RMB funds moving in and out of the Mainland, further development of RMB business will continue to proceed in a step-by-step manner in tandem with the opening of China’s capital account. Ensuring financial stability and bringing in financial innovation will continue to be the dual missions for Hong Kong on the road to RMB internationalisation.

Published on a quarterly basis, BEA’s Economic Analysis provides investors with an in-depth look into current market and economic issues. Copies of the report can be downloaded via BEA’s homepage: www.hkbea.com / Corporate Information /Economic Research.