The development of offshore RMB center in Hong Kong
2004: Hong Kong started personal RMB business.
As early as 20011,the Hong Kong Monetary Authority put forward the idea of developing personal RMB business in Hong Kong to the People's Bank of China, and the substantive discussion began in February 2002. After many exchanges and discussions, in June 2003, HKMA, the People's Bank of China and the State Administration of Foreign Exchange reached a consensus on major issues, and the overall plan was basically formed. In June 2003, the State Council approved Hongkong to try out personal RMB business. On February 25th, 2004, banks in Hong Kong officially began to provide RMB deposit, exchange, remittance, debit card and credit card services for individual customers.
The RMB business in Hong Kong launched in 2004 aims to facilitate the exchange of personnel between the mainland and Hong Kong, and guide the RMB cash deposited in Hong Kong to return to the mainland in an orderly manner through the banking system, so the service targets are limited to individual customers and merchants providing personal consumption services. Later, some business restrictions were relaxed in 2005, and in 2007, mainland financial institutions were allowed to issue RMB bonds in Hong Kong. At this stage, the balance of RMB deposits gradually increased from 654.38+0.2 billion yuan at the end of 2004 to 54 billion yuan in mid-2009. Although today's business scale seems to be limited, the cross-border clearing and operation arrangement behind it is groundbreaking, which not only opens the channel for cross-border transactions and flows of RMB through the banking system for the first time, but also lays an important foundation for the rapid development after 2009.
2009: Hong Kong started the construction of offshore RMB center.
In July 2009, the pilot of RMB settlement of cross-border trade was launched, which was an important watershed for Hong Kong's RMB business to enter the second stage. This move not only expands the RMB business in Hong Kong from individuals to enterprises and institutions, but also has greater strategic significance in the breakthrough of design concept and development model-from one-way cash return to the mainland to two-way RMB capital flow, which is a major step in RMB internationalization. Since 2009, with the continuous development and deepening of various cross-border RMB trade and investment businesses, more bridges connecting onshore and offshore markets have been connected, and more RMB has been used, circulated and precipitated overseas. This has enabled Hong Kong to develop rapidly as an offshore RMB business center and gradually take shape.
The pilot project of RMB trade settlement launched in 2009 only covers five mainland cities (Shanghai, Guangzhou, Shenzhen, Zhuhai and Dongguan), and many supporting policies and measures such as exporters' tax refund arrangements have not yet been put in place. After discussion with the People's Bank of China, the Hong Kong Monetary Authority made an important interpretation of the regulatory principles and operational arrangements in February 20 10, and clarified two basic principles: First, the cross-border inflow and outflow of RMB funds into and out of the Mainland must comply with the laws and requirements of the Mainland, and whether mainland enterprises handle related businesses in accordance with these laws and regulations must be reviewed by mainland regulatory authorities and banks; Second, after RMB flows into Hong Kong, banks can develop RMB business according to local laws, regulatory requirements and market factors as long as it does not involve the return of funds to the Mainland. In July of the same year, the People's Bank of China agreed to amend the settlement agreement accordingly, which provided greater policy space and certainty for Hong Kong banks to carry out various RMB businesses. These basic principles still apply today, pointing out the direction for the development of offshore RMB business in Hong Kong.
In the second half of 20 10, the RMB trade settlement arrangement was gradually implemented and expanded, and the business volume began to grow rapidly. However, at that time, there were only more than 300 export enterprises in the mainland that could accept RMB. In addition, offshore RMB far exceeded the amount of RMB paid by the mainland to Hong Kong at that time, and some people questioned whether the RMB trade settlement arrangement had become an arbitrage channel for speculating RMB. The Hong Kong Monetary Authority discussed with the People's Bank of China and took decisive measures to start the currency swap arrangement in real time, so as to reduce the market liquidity tension caused by the exhaustion of the quota, and then further clarified the bank's regulatory requirements for cross-border flat trading of customers. After the implementation of these measures, the RMB trade settlement operation has been gradually straightened out, the pressure on enterprises to buy RMB in the mainland for cross-border trade settlement has been reduced, and the flow of payment in and out of the mainland has gradually become balanced.
By 20 1 1 year, both banks and market participants have reported that there are not many ways for offshore RMB funds accumulated through trade settlement transactions to go abroad except deposits, and there is limited room for developing financial products such as RMB loans. There are opinions in the mainland that RMB funds flowing to Hong Kong and overseas should continue to circulate and settle abroad, and there should be no need to return to the mainland. But in fact, there is no economic or financial system that widely uses RMB overseas, and it is impossible for offshore RMB to be completely separated from the onshore market and recycled by itself. After in-depth argumentation in many aspects, it is basically accepted that the offshore and onshore markets should be properly connected, and the channels for cross-border RMB direct investment and financial investment (including investment in the mainland bond market and RQFII arrangements) are gradually established and expanded.
Why did the offshore RMB center in Hong Kong break through?
Financial centers all over the world are competing to develop offshore RMB business, surrounded by "strong enemies". How does Hong Kong break through? I think the key lies in the "idea"-policy space.
Clearance), market infrastructure, people/products.
Talents and products
I have always stressed that the winning way for an international financial center is talents and products, which is the core of "soft power". A first-class international financial center must be able to gather talents to design, develop and sell various financial products that meet the needs of consumers. In terms of personnel training and product development, industries including financial institutions, employees, and even trade organizations such as the national debt market association can and should become the protagonists. The standards of decision-making and supervision institutions are to ensure financial stability and protect consumers of financial services, but they should not replace them in evaluating market demand and developing financial products.
Policy space
Although market forces are very important, the development speed of offshore RMB business still depends on policy space to a great extent. In recent years, the opening of RMB capital account has been steadily advanced. In the past five years, the mainland has successively issued a number of policies, creating policy space for expanding the depth and breadth of cross-border RMB flow, and enabling the offshore RMB business in Hong Kong to develop rapidly. There are four milestones: first, the pilot project of RMB cross-border trade settlement was launched in 2009; Second, starting from 20 1 1, relax the use of RMB to pay for domestic and foreign two-way direct investment; Third, 20 1 1 launched the RMB Qualified Foreign Institutional Investor (RQFII) program, so that offshore RMB funds can be invested in onshore bonds and stock markets; Fourthly, in April, 2065438+2004, the Shanghai-Hong Kong Stock Connect mechanism, namely "Shanghai-Hong Kong Stock Connect", was announced, allowing Hong Kong and overseas investors to buy and sell Shanghai A shares through the Hong Kong Stock Exchange, and mainland investors to buy and sell Hong Kong stocks through the Shanghai Stock Exchange. Shanghai-Hong Kong Stock Connect is a historic step in the process of opening up the mainland capital account, which is conducive to promoting the interconnection of onshore and offshore RMB markets, and will certainly help by going up one flight of stairs, an offshore RMB business in Hong Kong.
Market infrastructure
The infrastructure of offshore RMB market has four pillars: first, a safe and efficient settlement and delivery system; Second, a perfect supervision system conducive to market development; The third is to set financial market benchmarks, such as the pricing of RMB-Hong Kong Interbank Offered Rate; The fourth is abundant liquidity. In terms of maintaining sufficient liquidity, the Hong Kong Monetary Authority has been committed to introducing measures to increase the liquidity of the offshore RMB market in Hong Kong. On June 20 12, a 7-day repurchase arrangement was introduced, with a settlement period of T+2, and the settlement period was gradually shortened to t+10 and T+0 in October and July of 2012, so as to facilitate more convenient and effective management of banks.
Looking forward to the future development of Hong Kong
The internationalization of RMB is a long and complicated process. Its form and speed are influenced by the pace of capital account opening in the mainland, and it also involves the complex interaction between the policy framework transformation and the market in the process of comprehensively deepening reform and opening up. The development of offshore RMB market is the inevitable condition and result of RMB internationalization. The expansion of RMB cross-border trade and investment transactions will certainly increase the volume and liquidity of the offshore RMB market, thus enhancing the willingness and space for offshore enterprises and financial institutions to adopt RMB. At present, the scale of offshore RMB market is still limited, and the deposit amount (about 65.438+0.5 billion yuan) is only about 654.38+0% of the onshore deposit (654.38+0 trillion yuan), far lower than the offshore dollar deposit, which is about 30% of the US mainland. But what is certain is that in the foreseeable future, the offshore RMB market will have huge growth space and potential.
With the continuous internationalization of RMB, can Hong Kong maintain its leading position as an offshore RMB business center? At present, RMB deposits and payment transactions in Hong Kong account for 70% of the global offshore market, but I don't think Hong Kong will and should always occupy such a high share. The internationalization of RMB is to make RMB more widely used and circulated around the world, but enterprises and individuals in different time zones have different needs. If the RMB business of overseas enterprises and banks is on a small scale for a long time, the demand for financing and agency banking services provided by Hong Kong banks will not be great. In other words, it is unrealistic to expect Hong Kong to monopolize offshore business for a long time, and the failure to truly internationalize RMB is not conducive to the sustainable development of Hong Kong itself as an offshore RMB business center. After all, the openness and convenience of cross-border use of RMB is based on the needs of national financial reform and economic development. Hong Kong can play an important role in promoting and catalyzing this process, and take this opportunity to consolidate the development of offshore centers and create a win-win situation.
As a pioneer, Hong Kong has ten years of experience and foundation, but our greater and more unique advantage lies in the close economic and trade ties between Hong Kong and the Mainland. 60% of the mainland's foreign direct investment originates from Hong Kong, and more than 50% of the mainland's foreign direct investment goes to or passes through Hong Kong. Re-exports and offshore trade through Hong Kong also account for 30% of the total foreign trade of the Mainland. Therefore, the offshore RMB market in Hong Kong will have advantages in scale, depth and breadth, and these advantages will not be weakened by RMB business in other places. As long as Hong Kong continues to strengthen the RMB business ties between Hong Kong and the Mainland and overseas, and consolidate and enhance the functions and functions of the central hub, Hong Kong will have great potential as an offshore RMB business center. (This article is based on the author's speech at the "20 14 National Debt Market Summit" in September 15 and the manuscript in February. )