RMB Offshore Centre

Lee Ka Keung 08028443 Law Po Yan 08026068

The definition of Renminbi Offshore center (人民幣離岸中心 )

When the currency flows to a place outside its native market, this place is called the offshore centre.

Where should RMB offshore centre be located? HK or Shanghai?

• It is suggested HK should be a better choice

• Defined by Chinese University of Hong Kong Finance Department Associate Professor Su Weiwen

What factors make Hong Kong a more suitable place to be the Renminbi offshore center?

(1)Official recognized status from China;(2)Circulation of Renminbi is approved (認可流通 ) in Hong

Kong;(3)Deposit of Renminbi in Hong Kong is not restricted by the

China law;(4) World-Qualified clearing and settlement system(5)Relaxation of RMB business in HK recently(6) internationally recognized legal system (7) No restriction on the flow of information(8) Hong Kong’s business is market-oriented

Shanghai has to make the following most significant changes to become a potential RMB offshore centre in the future

Develop a different and separate legal system from the onshore

Establish a separate financial system from the onshore

Milestones: Relaxation of RMB business in HK

2004 /2: Hong Kong is permitted to manage the deposit, remittance, exchange as well as credit card of those 4 individual Renminbi services

2005/11: individual Renminbi cash exchange quota increased by 6000 Yuan each person each time to 20,000 Yuan; Allowed 7 assigned Hong Kong financial institutions started Renminbi cash deposit account

2006/12 Financial institutions in China were permitted to release Renminbi bonds in Hong Kong; Allowing Hong Kong importer to use Renminbi to pay inland import shipments

2009/7 RMB cross-border trade settlement pilot program was launched.  It was originally limited to 5 places in China. When they trade with Hong Kong, RMB can be used as the currency to settle trades. After this program was implemented, the applicable areas was expanded to 20 provinces and cities, including Beijing, Chongqing, Tianjin,etc.

2010/7 Restrictions on interbank transfers of renminbi funds would be lifted andcompanies can open renminbi account in Hong Kong without cap.

RMB cross-border trade settlement pilot program

The benefit of Renminbi offshore center in Hong Kong

• (1) Once Hong Kong becomes the Renminbi offshore center, Hong Kong's international financial center status can be further consolidated;

• (2) And it will stimulate further consumption in Hong Kong; the banking industry will bring the income to Hong Kong. It is estimated that after establishing the Renminbi disembark financial center, the Renminbi services may bring at least HK$2.6 billion profits for Hong Kong Banking industry

References

http://www.capital-hk.com/common_emag/view_content.php?issue_no=260&pub_id=5&top_id=1&art_id=75802

http://www.plus-concepts.com/banking09/presentation/Stream%202%20-%201600%20-%20Catherine%20Wang,%20Wing%20Lung%20Bank.pdf

https://www.citicbankintl.com/_document/about-us/market-research/2010-06-29/en/mr100629.pdf

http://www.hangseng.com/ermt/eng/fxmv/pdf/ecof_e_2010july.pdf