Yuan Internationalisation Boosts Hong Kong as Offshore Hub
Yuan Deposits Boost Hong Kong's Status
Chinese yuan deposits in Hong Kong have soared to 1.06 trillion yuan (US$149.5 billion) as of July, cementing the city’s position as the premier offshore hub for the yuan amid accelerating yuan internationalisation. Despite a slight decline of 0.4%, this marks the fourth consecutive month of deposits exceeding 1 trillion yuan, reflecting a robust demand.
Impact of Equity Market on Yuan Demand
The uptick in yuan deposits aligns with an increase in cross-border trade settlement, which reached 1.28 trillion yuan, up 1.6% since June. This growth can be attributed to rising confidence in the equity market, as indicated by a 7% rise in the Hang Seng Index during Q2. The trading activity by mainland Chinese investors on the Stock Connect mechanism also surged, revealing a renewed interest in the Hong Kong equity market.
Investor Confidence in Yuan
- Kelvin Lau of Standard Chartered highlights a return of mainland investors who previously held back due to weak market sentiment.
- Continuous growth in yuan deposits is encouraged by genuine business needs and a structural shift in preferences for holding renminbi.
- The renminbi globalisation index rose to a record high, suggesting a growing acceptance of the yuan in global payments.
Classification and Future Trends
As the yuan captures a larger share of global payments, with a record 4.74%, and maintains its second position in global trade finance, analysts believe that diversifying reliance on traditional markets will lead more companies to adopt the renminbi. Additionally, the demand for dim sum bonds has surged, as low financing costs attract substantial interest from investors. With a strong backing from the local financial ecosystem and evolving foreign-exchange dynamics, the yuan's internationalisation trajectory appears promising.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.