San Francisco, May 4 (People's Daily Online) -- Professor K.C. Chan, Hong Kong secretary for Financial Services and the Treasury, said recently during his visit to San Francisco that Hong Kong and Shanghai free trade zone are complementary rather than competitive.
2014 marks the 10th anniversary of the launch of renminbi banking business in Hong Kong where the RMB deposit-taking, currency exchange, remittance and other services to personal accounts were started in 2004.
In July 2009, it expanded from serving personal customers to enterprises and institutions, and transformed from one-way repatriation of RMB notes to two-way flows, which signified a crucial step forward to internationalization of the RMB. With the increasingly used, circulated, and accumulated of RMB in overseas market, Hong Kong has grown into an offshore RMB business center and economic booster.
In February 2014, Chinese central bank promulgated regulations that allow companies based in the Shanghai free trade zone (FTZ) to conduct offshore RMB borrowing. Furthermore, Chinese Premier Li Keqiang said at the Boao Forum Asia 2014 that China is to connect the stock exchanges of Shanghai and Hong Kong, to boost two-way opening of the capital markets and enhance their integration with the global market
Some experts said the move will be positive for H share performance as many mainland investors have been interested in investing in Hong Kong market but they were previously restricted. While some others saw a fierce competition between the two markets.
Professor Chan told People's Daily Online during the visit to San Francisco that "what Shanghai FTZ does is complementary to Hong Kong's business services."
"I have been to the Shanghai FTZ and seen some HK banks moving there," he said. "I think it's very successful." Talking about the offshore RMB business, Chan said that it needs multiple and various services, including trading services, foreign exchanges, and other financial supports besides banking services. According to the data from the Hong Kong Economic & Trade Office in San Francisco, at the end of February 2014, there were 201 authorized institutions and 62 representative offices in Hong Kong.
At the end of 2013, total loans provided by authorized institutions to finance international trade and other loans for use outside Hong Kong totaled 71 billion U.S. dollars and 248.8 billion U.S. dollars respectively. Hong Kong has already become a mature international hub for offshore RMB business with systematic services and sound banking system. Chan said that the main customer groups of Hong Kong are international investors while the Shanghai FTZ currently provides services to the mainland companies. These two markets are complementary.
Chan told the reporter that the FTZ is an experiment by which the Chinese government tries to provide lower barriers of market entry and take away the disturbance for the companies. Hong Kong was Chinese mainland's largest source of realized foreign direct investment, accounting for about 48 percent of the national total at the end of 2013, with the cumulative value reaching 666 billion U.S. dollars. As a long-existing RMB business center, Hong Kong will "help companies to access the Chinese market".
When asked when RMB will be freely convertible, professor Chan joked that "it will be convertible as soon as I can expect". He said, "It is a question we should take seriously. I think they are moving to the direction."
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