Hong Kong society welcomed the State Council's decision to allow mainland financial institutions to issue Renminbi (RMB) financial bonds in Hong Kong on Wednesday.

Chief Executive Donald Tsang said this new category of RMB business is conducive to business opportunities for banks and enhancing financial flow between Hong Kong and the mainland.

The People's Bank of China (PBOC), China's central bank, announced Wednesday that mainland financial institutions can issue RMB financial bonds in Hong Kong with ratification from the central bank.

"The further expansion of RMB business in Hong Kong embodies the support of the Central Government in strengthening Hong Kong's position as an international financial center," Tsang said.

Financial Secretary Henry Tang said the move will promote economic integration between Hong Kong and the mainland and provide channels for returning RMB circulating in the city back to the mainland.

The government will meet with People's Bank of China representatives next week to discuss the detailed arrangements.

Turning to the proposal of allowing Hong Kong importers to settle direct import trade from the mainland in RMB, Tang said the Central Government is still devising the management arrangement.

Hoping the proposal can materialize as early as possible, Tang said the government will maintain liaison with the Central Government.

Spokesman for Hong Kong Monitory Authority said RMB business in Hong Kong has been developing in a stable and orderly way since its very beginning. The new decision by the State Council will further promote the amalgamation of the two economies, and let money flow back to the mainland easier.

In addition, to establish an issue system of RMB financial bonds is also a great impetus to Hong Kong's bond market development, which will help build a more flexible capital flow platform in Hong Kong, the spokesman added.

Local analysts agreed this decision will have a big impact on the development of Hong Kong's capital market, which will provide more opportunities for financial institutions and increase deposit volume of RMB in Hong Kong.

So far there is a bit over 20 billion yuan deposit in Hong Kong, which is at a very low level.
Meanwhile, analysts believed that it will proceed in a cautious way in the early stage because there remains some technical problems.