Exactly what policy support Hong Kong would receive is unclear, but there is huge potential for the issuance of yuan-denominated financial products, trade settlement and use of the digital yuan.
China will push for greater international use of the yuan by giving more support to Hong Kong as an offshore trading centre next year, while also diversifying its forex reserves, the People’s Bank of China (PBOC) has said. Efforts to support the city as a yuan hub were among the central bank’s 2022 priorities, outlined at its annual work conference, and marked a change in tone from the “steady and prudent” economic message in the country’s five-year plan. The announcement on Monday comes as Beijing looks for ways to manage “ possible spillover ” from an imminent rate hike by the US Federal Reserve and promote investment across Belt and Road Initiative countries. “We’ll strengthen the support for the construction of Hong Kong as an offshore yuan hub, and promote the healthy development of offshore centres,” the PBOC said in an online statement. Hong Kong, which had end-October deposits of 834.9 billion yuan (US$130.9 billion) and accounted for 46 per cent of China’s cross-border payments last year, is a key international financial centre for Beijing, though it will be integrated more tightly with mainland cities under the Greater Bay Area plan, which includes Guangdong province and Macau. Hong Kong’s close economic connection with the mainland, including its stock, bond, and wealth management connect programmes, give it an edge over other offshore yuan centres like Singapore and London. The central bank did not elaborate on what policy support the special administrative region would receive, but there is huge potential for the issuance of yuan-denominated financial products, trade settlement and use of the digital yuan.
