| Expanded scheme strengthens Hong Kong's RMB platform
On July 19, the Chief Executive of the Hong Kong Monetary Authority (HKMA), Norman Chan, and the Deputy Governor of the People’s Bank of China (PBoC), Hu Xiaolian, signed a Supplementary Memorandum of Cooperation on the expansion of the renminbi trade settlement scheme.
Following the expansion of the scheme, the HKMA and the PBoC have agreed to strengthen cooperation and further promote Hong Kong’s status and role as a renminbi market platform in the process of developing renminbi business outside mainland China. This is a milestone in the development of offshore renminbi business in Hong Kong and a very crucial step in the implementation of the two guiding principles set out in the HKMA circular issued in mid-February.
The PBoC and the Renminbi Clearing Bank, Bank of China (Hong Kong) Limited, also signed a revised Settlement Agreement on the Clearing of Renminbi Businesses.
“Following the revision of the Settlement Agreement, there will no longer be restrictions on banks in Hong Kong in establishing renminbi accounts for and providing related services to financial institutions; and individuals and corporations will be able to conduct renminbi payments and transfers through the banks. I expect that many more types of financial intermediary activities denominated in the renminbi will be introduced in the market, helping Hong Kong’s renminbi business platform leap to new heights,” Mr. Chan said.
According to the Cross-Strait Financial Cooperation Agreement signed in 2009, it was agreed that the exchange, supply and repatriation of cashnotes would be conducted through suitable means with commercial banks as intermediaries. Subsequently, further to discussions among the parties concerned, it has been determined that the arrangement for the exchange, supply and repatriation of renminbi cashnotes with Taiwan is to be conducted — with the Hong Kong Renminbi Clearing Bank as the intermediary — through the renminbi platform in Hong Kong.
Under the arrangement, the Renminbi Clearing Bank in Hong Kong will provide renminbi cashnote exchange and related services to the Hong Kong branches of eligible Taiwan commercial banks, as determined by Taiwan. In turn, the Taiwan head offices of such commercial banks will provide renminbi cashnote exchange services to other authorized financial institutions in Taiwan, for the purpose of serving personal customers locally.
To facilitate the related operations, the People’s Bank of China and the Hong Kong Monetary Authority have signed a Memorandum of Cooperation in relation to the Renminbi Clearing Bank’s Taiwan renminbi cashnote business. The Renminbi Clearing Bank in Hong Kong will also soon sign a settlement agreement with the Hong Kong branch of the relevant commercial banks.
Hong Kong Financial Secretary John C. Tsang welcomed the arrangement, noting that, “Hong Kong’s established renminbi clearing platform is providing a practical arrangement to facilitate cross-strait cooperation on monetary management. This also underscores that Hong Kong, as a leading international financial center in the region, can play an important role in and contributes further to cross-strait financial cooperation and development.”
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