The private sector-led Hong Kong-London Forum, which was established in January 2012 to promote closer collaboration between Hong Kong and London in support of the wider international use of the renminbi (RMB), held its third meeting in Hong Kong on September 26, 2013.
The meeting was attended by senior representatives of the Hong Kong and London offices of ten banks, namely Barclays, Bank of China, China Construction Bank, Citibank, Deutsche Bank, HSBC, Industrial and Commercial Bank of China, J. P. Morgan, Royal Bank of Scotland and Standard Chartered Bank. The Hong Kong Monetary Authority (HKMA) and UK Treasury acted as facilitators, and the Financial Services and the Treasury Bureau of the Hong Kong Government and Bank of England (BoE) attended as observers.
The Forum participants reviewed the latest developments in the international RMB market. Participants noted the strengthening of cross-border trade settlement activities and the expansion of RMB products and services, especially in foreign exchange and also in the availability of a wide range of hedging and other investment products.
Liquidity and market confidence in the offshore market continued to grow, as evidenced by the increased uptake of RMB by both companies and financial institutions. It was said that these developments have been aided by the RMB-sterling swap line agreement between the People's Bank of China and the BoE and the recent enhancement of HKMA's RMB liquidity facility to provide overnight funds.
It was confirmed that growth prospects of RMB business have been buoyant and will continue to benefit from the on-going liberalization measures by the Chinese authorities and increasing channels for cross-border flows with Mainland China. In this regard, Forum participants welcomed the significant expansion of the RMB Qualified Foreign Institutional Investor scheme, as it is expected to provide new opportunities for asset managers in Hong Kong and London.
Forum participants also reported that significant progress has been made in taking forward the actions agreed at their last meeting in December 2012. Notable achievements have included an increased utilization of RMB by corporates in cross-border transactions. Indeed, the volume of RMB cross-border trade transactions conducted with Mainland China increased by 48 percent in the year to August 2013, following 32 percent growth in 2012, and 47 countries are now using RMB for over 10 percent of their payments with Mainland China and Hong Kong.
Foreign exchange and other market activities in RMB have also expanded. Driven by the expansion of offshore RMB trading, the average daily turnover in the RMB settlement system in Hong Kong increased to some RMB400bn (USD65.4bn) in the year to August, while there was a 200 percent increase in spot RMB foreign exchange transactions in London over 2012. Market participants have also taken steps to reduce foreign exchange settlement risks through bilateral netting arrangements.
In addition, the launch of the CNH HIBOR fixing in Hong Kong in June 2013 has provided the benchmark for RMB loan facilities and financial instruments, and spurred their growth, as well as interest rate products and hedging products, such as interest rate swaps and other derivative products. These products are now being offered in Hong Kong and London, enabling a wider range of market participants to better manage their RMB-related risks.
In the future, Forum participants agreed to step up their on-going efforts, which will focus on further enhancing the breadth and depth of the offshore RMB market, while actively seeking to provide services in response to the opening of more channels for cross-border flows with Mainland China.
In particular, Forum participants recognized the need to continue raising corporate awareness while working to make the offshore RMB market more user-friendly and accessible, and agreed to further develop market solutions to enhance RMB liquidity and reduce foreign exchange settlement risks, including extending arrangements to further facilitate same-day settlements between Mainland China and offshore markets in different time zones.
The next meeting of the Forum is scheduled to be convened in London during the course of 2014..
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