RMB internationalisation to accelerate

June 19, 2023

Financial Secretary Paul Chan

With the launch of the new Dual-Counter Model, it is encouraging to see that 24 companies will be offering their shares in both the Hong Kong dollar and the renminbi (RMB). Many of them, to be sure, are highly sought-after stocks with promising liquidity, accounting for, as alluded earlier to by Gucho (Hong Kong Exchanges & Clearing Chief Executive Nicolas Aguzin), around 40% of the average daily turnover of our stock market. Their participation is clearly a vote of confidence for the new offering.


This is certainly good news for local and global offshore RMB holders as the regime offers more diversified investment options.


For those who have yet to join, I look forward to welcoming you to the Dual-Counter family soon enough.


While some may say that the first RMB listing in Hong Kong took place more than 10 years ago, and there are plenty of RMB securities such as exchange-traded funds and debt instruments on the market, the new Dual-Counter Model offers much excitement.


Shares traded under this model would belong to the same class, with the same rights and entitlements, and be fully tradable across counters. Together with the market makers selected to ensure adequate liquidity for the designated shares trading in RMB, this will substantially facilitate transactions and enhance price efficiency of such stocks.


And the model is launched right at a time when the strategic importance of RMB - in terms of fund flow, liquidity and popularity - is rising.


In 2021, the total amount of cross-border use of RMB reached over RMB36 trillion, representing an increase of nearly 30% over the year before. As at the first quarter this year, the proportion of RMB in cross-border payments and receipts in the Mainland has risen to 48%, surpassing the US dollar for the first time. In addition, using RMB as a settlement currency for international trade and investment has become increasingly prevalent.


Of course, viewing it holistically, there is still ample room for the global use of RMB to grow. While our country is the world’s second largest economy, accounting for more than 18% of the world’s gross domestic product, and is the largest trading economy contributing to about 13.5% of global trade, the use of RMB in SWIFT, ie cross-border trade settlement, and as a worldwide reserve currency, constitutes less than 3% respectively.


It is clear that the internationalisation of the RMB will only accelerate in the future, particularly under this rapidly changing global geopolitical and environment - which is unseen in a century. Seeking diversification for greater security is on everyone’s agenda.


As countries trade and invest in RMB and use it as a reserve currency, the demand for various investment and risk management products is bound to rise.


Hong Kong will play a pivotal role in this great process of change, and we are keen to grasp the opportunities ahead. We have long been the offshore RMB hub, no matter in terms of liquidity, trade settlement or product variety.


And thanks to the staunch support of the central government, our currency swap arrangement with the People’s Bank of China ensures that we have more-than-enough liquidity.


Looking ahead, we are determined to expand the channels for cross-boundary RMB flow, provide more investment and risk management products, and upgrade our related infrastructure to build an even more vibrant offshore RMB ecosystem.


A short-term priority is, of course, the inclusion of RMB-denominated securities under the Southbound Connect, so that Mainland investors can trade Hong Kong shares with their onshore RMB.


And rest assured, we will continue to collaborate with our Mainland counterparts to expand the mutual-market access programme, with a view to promoting greater connectivity between the investors and capital markets of the Mainland and the world.


Financial Secretary Paul Chan gave these remarks at the Gong Striking Ceremony for the launch of the HKD-RMB Dual Counter Model on June 19.

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