On March 16, a multi-currency, cross-border payment arrangement made between the Mainland and Hong Kong went live.
The arrangement was jointly taken by by the People’s Bank of China and the Hong Kong Monetary Authority.
The establishment of the payment arrangements is an important move to strengthen cooperation in the area of financial infrastructure between the two economies. These arrangements also mark the introduction of a wide-ranging, cross-border payment and settlement mechanism covering multiple currencies.
The arrangements cover cross-border payment and settlement items of relevant foreign currencies in compliance with the Mainland’s requirements for foreign exchange control. Currently, the arrangements cover four currencies: the Hong Kong dollar, U.S. dollar, euro and British pound. Adding other currencies will depend on market demand.
Cross-border payment arrangements for the Hong Kong dollar, U.S. dollar and euro are implemented through linkages between the Hong Kong dollar, U.S. dollar and euro Real Time Gross Settlement (RTGS) systems on the Mainland (i.e. China’s Domestic Foreign Currency Payment System) and the respective RTGS systems in Hong Kong. Participating banks on the Mainland and in Hong Kong are able to issue and receive cross-border payment instructions in these three currencies through the relevant RTGS systems in their respective places.
The cross-border payment arrangement for the British pound is implemented through a linkage between the Mainland’s British pound RTGS system. Mainland participating banks and Hong Kong banks are able to issue and receive cross-border payment instructions in British pounds through the Mainland’s RTGS system and the network of agent banks in Hong Kong, respectively.
The respective Mainland Settlement Institutions for the Hong Kong dollar, U.S. dollar, euro and British pound are China Construction Bank, Bank of China, Industrial and Commercial Bank of China and Shanghai Pudong Development Bank. They have appointed China Construction Bank, Hong Kong Branch; Bank of China (Hong Kong); Industrial and Commercial Bank of China (Asia); and Citibank (Hong Kong) as their respective agent banks in Hong Kong.
The cross-border payment arrangements between the Mainland and Hong Kong provide banks in Asia with a payment mechanism operating in the same time zone, thereby increasing the efficiency of cross-border, multi-currency payments and reducing payment and settlement risks and costs. Under these arrangements, Mainland and Hong Kong participating banks benefit from enhanced liquidity efficiency and management, as well as increased competitiveness in cross-border payment services. The arrangements represent a key step forward in strengthening the economic and financial ties between the Mainland and Hong Kong.
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