Offshore yuan business to make way into Europe, US

Dim sum bond issuance in first 10 months of 2012 exceeds 2011 level

The Hong Kong offshore yuan businesses are making greater inroads, as the yuan trade settlement handled by the city's banks and yuan-denominated lending in the first 10 months of 2012 all exceeded the 2011 level. In order to spur even further growth, the Hong Kong government will initiate a series of promotional activities in Switzerland and the United States to publicize the local yuan financing platform.

According to the Hong Kong Monetary Authority, the city's de facto central bank, yuan trade settlement handled by Hong Kong banks amounted to 2.1 trillion yuan in the first 10 months of 2012, exceeding the annual total of 2011. The amount handled by local banks represented over 90 percent of the mainland's offshore trade settlement amount.

In the same period, yuan-denominated lending in the city totaled 70 billion yuan, exceeding the 30 billion yuan-denominated lending for the whole of 2011.

Dim sum bond issuance in the Jan-Oct 2012 period reached 95 billion yuan, about the same issuance amount in 2011. As at the end of October, there were approximately 197 dim sum bonds issued to raise a total of 277 billion yuan.

"The central government hopes that Hong Kong can play a major role in the yuan internationalization process, including the promotion of cross-border yuan trade settlement, dim sum bond issuance to elicit more offshore yuan demand, and developing offshore yuan banking services to enhance offshore yuan liquidity," Financial Secretary John Tsang said at the Paris EUROPLACE conference on Friday.

"Hong Kong will leverage its close relationships with major international trading partners to promote yuan internationalization," Tsang added.

HKMA Chief Executive Norman Chan hoped that Hong Kong banks should prepare themselves to launch yuan-denominated products and services to capture a share of the market.

"As Hong Kong possesses the world's largest yuan liquidity pool outside the mainland, coupled with the city's well-designed financial infrastructures, Hong Kong should utilize its competitive edges to cooperate more with the mainland to promote offshore yuan financing business to achieve a win-win scenario," Chan added.

According to HKMA data, the current outstanding amount of yuan deposits and certificates of deposits issued in Hong Kong reached 670 billion yuan.

HKMA Deputy Chief Executive Eddie Yue in the same seminar added that Hong Kong must be innovative in creating more yuan-denominated financial products to foster the mature development of the local offshore yuan financial market.

The seminar organized by Paris EUROPLACE - the organization promoting the Paris financial center - presented its roadmap on how France can contribute to the yuan internationalization process.

"France is the second largest yuan deposit base in Europe with yuan deposits totaling 10 billion yuan. The French corporations also issued dim sum bonds worth 7 billion yuan in 2011/2012, on par with the German counterpart, and twice the size of the UK issuers," Paris EUROPLACE Chief Executive Officer Arnaud de Bresson said.

"Nearly 10 percent of Sino-French trade is already settled in yuan with further room for growth," de Bresson added.

oswald@chinadailyhk.com