Accelerating Offshore RMB Market Development: Enriching Hong Kong's Offerings as an International Financial Centre
28 Mar 2024
Hong Kong, a leading international financial centre (IFC), should continue to boost its competitiveness by capitalising on its strong connections with the Mainland and the global financial community. A particularly promising avenue that holds immense potential for this pursuit is the proactive enhancement of its offshore RMB business.
The internationalisation of the RMB, as reflected in the non-domestic market usage of the currency as well as the use of it in cross-border transactions, has gained traction since the 2000s, a period when China’s economic growth was steaming ahead of global economic momentum. In this context, Hong Kong, as the most open territory in China and a crucial gateway between the country and the global community, serves as a conduit for the RMB’s entry into wider circulation.
The city’s sophisticated financial infrastructure and its status as a global financial centre provide the requisite conditions for the RMB’s offshore expansion. Instrumental to this process has been the establishment of a range of mutual market access schemes, which have facilitated seamless cross-boundary capital flows. As a result, Hong Kong has become a leading offshore RMB centre, boasting the largest RMB deposit pool among RMB offshore markets and a diverse portfolio of Mainland product offerings.
Looking ahead, RMB internationalisation shows room for improvement. A case in point is the stark contrast between the country’s share of global GDP and its currency’s share of cross-boundary payments, which stayed at 17.78% in 2022 and 4.51% in January 2024, respectively. Noting the evolving global landscape and other domestic and external drivers, RMB internationalisation is poised to move forward on a global scale. Along the trend is an uptick in demand for the RMB as an international medium of exchange, a tool for financing, and as an investment currency. To capture these opportunities, support national development, and strengthen its status as an IFC, Hong Kong must proactively adapt and respond.
The Financial Services Development Council (FSDC) has established a dedicated Working Group comprised of industry experts to steer the research process. Additionally, through private consultations with various industry associations, the FSDC has sought a broad representation of market insights. This collaborative effort has resulted in a set of recommendations presented in this report, aimed at supporting the internationalisation of the RMB, thus further strengthening Hong Kong’s status as an IFC.
The recommendations in this report are structured around three major themes. The first theme focuses on enhancements building upon the existing mutual market access schemes. The second set of recommendations aims to expand the offshore RMB market’s scope and influence. Lastly, the report outlines potential measures to expedite the development of the RMB ecosystem in Hong Kong.