THE Hong Kong Monetary Authority (HKMA) has fine-tuned its yuan trade settlement program to ensure stable development of the fast-growing key offshore market for the yuan.
Norman Chan, chief executive of the HKMA, forecast demand for yuan trade settlement in Hong Kong would reach around 4 billion yuan (US$600 million) in the first quarter of 2011.
The HKMA will set up a standby credit facility of 20 billion yuan through its currency swap line with the central bank to cover any excess demand, he told reporters.
Next year will be a crucial year for developing the yuan offshore market in Hong Kong because the mainland authorities have just announced a major expansion of the list of pilot enterprises that can qualify to participate in yuan trade settlements, Chan said.
Earlier this month, the Central Government announced the expansion of its cross-border yuan trade settlement pilot programme to 67,359 exporters from an original 365 companies.
The HKMA also said it would help ensure stability for the offshore yuan market by putting a time limit on currency transactions.
Participating banks can only purchase yuan through the Shanghai conversion window for their customers to trade transactions due for payments within three months, Chan said.
Since rules to promote cross-border trade settlement were relaxed in the second half of 2010, the offshore yuan business has exploded in Hong Kong, with so-called dim sum bonds meeting feverish demand and the yuan deposit base rising sharply. Yuan deposits in Hong Kong jumped to 280 billion yuan by the end of November from 217 billion yuan at the end of October, Chan said. (SD-Agencies)
