Relaxing yuan conversion limit can boost Hong Kong's role in offshore investment
Diana Cesar says move will buoy investors and boost currency's status
The renminbi is well on its way to becoming an international currency. Hong Kong has developed the largest renminbi offshore liquidity pool with retail deposits and cross-border trade settlement and is demonstrating sustainable growth.
The currency's stable valuation and steady appreciation are encouraging investors to include more renminbi products in their portfolios.
In Hong Kong, if locals want to deposit or buy renminbi-denominated investment products, they have to accumulate the sum required through a daily conversion of a maximum of 20,000 yuan (HK$25,000). There is a strong desire from locals to see this daily limit relaxed, as has been proposed by the Hong Kong Monetary Authority.
Renminbi currently makes up 11 per cent of Hong Kong's total deposits. These deposits rose by 7.1 per cent, to 781.6 billion yuan, in October from September. The pool of offshore renminbi in Hong Kong, including deposits and certificates of deposits, stood at over one trillion yuan in October. About 30 per cent of the renminbi customer deposits are held by personal customers, according to the HKMA.
The demand for renminbi investment products is growing among retail customers, according to our tracker survey this year. Almost one-third of Hong Kong respondents are interested in products using the renminbi as the underlying denominator. The general opinion is that the renminbi will continue its upward trend and they plan to invest more in renminbi products.
Apart from time deposits, there are various renminbi-denominated products offered by banks in Hong Kong including bonds, bond funds, structured products, exchanged-traded funds and stocks to meet different needs of retail investors. The product suite is expected to be enriched with the removal of the daily conversion limit as it provides more convenient means for individuals to buy yuan-denominated investment products, especially those with an investment amount exceeding the current threshold.
