Offshore yuan trade in Hong Kong growing: Tsang

HONOLULU: Hong Kong is "making good progress" as China's premier offshore global trading center for the yuan, the Chinese territory's chief executive Donald Tsang said Friday.

By the end of September, deposits had reached 622 billion yuan ($97 billion), Tsang told a business forum in Honolulu, estimating that trade settlement handled by Hong Kong banks would exceed 1.5 trillion yuan this year.

"Since the launch of renminbi (yuan) banking in Hong Kong in 2004, the scope of business and the pool of renminbi liquidity have expanded rapidly," he said. "We are making good progress."

Tsang, speaking on the sidelines of Asia-Pacific Economic Cooperation (APEC) meetings, said Hong Kong's role as the premier offshore center for the yuan trade had been outlined in China's 12th five-year plan earlier this year.

Analysts say China is stepping up efforts to increase overseas use of the yuan partly to reduce the country's exposure to the US dollar and allow the unit to take on a greater global role in line with its trade prowess.

The move has been welcomed by China's key trading partners such as the United States, which say the yuan is undervalued, making Chinese exports cheaper on world markets and thereby gaining an unfair trade advantage.

Hong Kong introduced yuan bonds in 2007 and yuan trade settlement in 2009. Banks in Hong Kong can now offer a range of yuan services to personal and corporate customers, Tsang said.

"We look forward to playing a full and pivotal role in the gradual liberalization of the mainland currency.

"Not only will this firm up Hong Kong's financial services sector in times of global uncertainty," he said. "It will -- I believe -- provide stability and opportunity to the global financial system."

Beijing has recently taken small steps to relax controls on the currency and increase its use in global trade as it tries to reduce China's exposure to the dollar.

Last month, authorities announced rules to allow foreign companies to use yuan raised overseas to invest in China, which analysts said was a positive step for increasing cross-border flows in the currency.

Singapore has voiced its ambition to become the secondary yuan trading center after Hong Kong, as the Chinese currency gains broader global usage.

Copyright AFP (Agence France-Presse), 2011