HKEx's Joseph Yam says Hong Kong's international financial role will be further enhanced when the SAR offers yuan services

Hong Kong's status as an international financial centre has been further enhanced after being given the green light by Chinese mainland authorities to start offering yuan banking services from January 2004.

Monetary Authority chief executive Joseph Yam said that while much remains to be done, "this is a very good and promising start that will enhance Hong Kong's status as an international financial centre, and is a small step towards the creation of an offshore yuan banking service.

Under the agreement, banks in Hong Kong can provide yuan deposit, remittance, exchange and credit card services.

"The arrangement for Hong Kong banks to conduct yuan business will open a new channel for the flow of funds between Hong Kong and the mainland through the banking system," said Mr Yam. "This will be advantageous to the Hong Kong banking sector and increase its competitiveness."

Offshore yuan centre

Mr Yam said that Hong Kong is on the path to becoming a fully-fledged offshore centre for the yuan, with full convertibility to eventually follow.

"It would be good for Hong Kong if it could become an offshore yuan market," said Tai Hui, economist at Standard Chartered Bank. "As the yuan is now being recognised in many countries, many foreign countries might wish to set up Hong Kong bank accounts for yuan transactions. Many could also see the benefits of setting up offices in Hong Kong as our legal and financial services can assist them doing business in China."

The main immediate beneficiary of the agreement will be the bank selected to establish a yuan clearing centre, which will channel yuan from Hong Kong to China. This would allow an outlet for the massive amounts of mainland currency circulating in Hong Kong (estimated to be 80 million yuan (HK$74 billion).

HSBC, Standard Chartered Bank and the Bank of China (HK) have all stated their interest in providing a clearing centre.

The new agreement is also expected to boost mainland tourists' spending in Hong Kong as they will be able to use yuan credit cards.

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Hong Kong Monetary Authority 
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