A new clearing agreement will allow Companies to get free rein on yuan exchange
A new clearing agreement to be signed next week will allow Hong Kong financial firms to sell yuan-denominated insurance, securities and fund products in the city, sources say.
The move will further enhance Hong Kong's role as an offshore yuan center.
The deal will be signed by People's Bank of China vice governor Hu Xiaolian and Monetary Authority chief Norman Chan Tak-lam.
Under the agreement, yuan deposits can be transferred freely among different bank accounts and firms can conduct yuan exchanges with no fixed cap.
Companies will be free to open yuan- denominated accounts under the agreement, even if they do not conduct business across the border in yuan.
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But the daily exchange cap for individuals will remain at 20,000 yuan (HK$22,952).
Coming on the heels of the announcement that Hong Kong will be the yuan clearing center for transactions between Taiwan and the mainland, economists feel the new plan is a "major breakthrough," as it will boost yuan-based business in the city.
The agreement will allow more flexibility for the yuan to flow to global markets, thereby reducing reliance on the US dollar.
ICBC (Asia) (0349) director Stanley Wong Yuen-fai said Hong Kong will now act as a yuan hub that is similar to Tokyo's yen clearing role.
He believes total yuan savings in Hong Kong may increase as local branches of Taiwan banks have to open accounts and possibly maintain savings in the light of the yuan's appreciation potential.
He noted that yuan-denominated insurance will likely be the first product to hit the market given that it is a long- term investment.
Head of research at Redford Securities, Kenny Tang Sing-hing, feels yuan-denominated bonds and non- deliverable forward forex products will be among the first products to be sold.
According to BOCHK, total cross- border yuan settlements in Hong Kong reached 7.5 billion yuan in June. The news came as Bank of China (Hong Kong) (2388) was appointed by PBOC to be a new provider of yuan banknotes and related services to local branches of eligible Taiwanese banks.
Under the Taiwan-mainland trade agreement, Taiwanese can exchange 20,000 yuan worth of cash each time but there is no limit between BOCHK and Taiwanese bank branches.