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Hong Kong's Role as Cross Border RMB Settlement Center October 7, 2010
On the evening of Oct 7, Hong Kong Association of New York (HKANY) held a discussion at Deloitte LLP for its members and guests by Mr Ray Feng, Executive Director and Deputy General Manager of China Merchants Securities (HK), on Hong Kong’s role as a cross border RMB settlement centre. Opening introductions were made by Mr Fred Teng, HKANY Chairman, and Mr Clarence Kwan, National Managing Partner, U.S. Chinese Services Group, Deloitte LLP.
Mr Ray Feng, with over 15 years of experience in banking and finance, spoke on Hong Kong's unique position as an RMB settlement centre, and also on the strategies undertaken and planned for the economic developments of the Pearl River Delta, including CEPA and Qianhai. This program was well attended by over 60 members and guests including representatives from Deloitte, HSBC, McKinsey, President of CBM Group, President of Chen Planning Consultants, to name just a few. Also in attendance were Brian Lee, Chief Representative of Hong Kong Monetary Authority and HKANY Board Member, Byron Lee, Director of Hong Kong Trade Development Council New York and HKANY Board Member. The host, Deloitte LLP, provided generous refreshments and snacks during the first half hour reception, creating a genial atmosphere for guests to converse and network with each other.
Mr. Feng first spoke on the increasing demands on RMB as the settlement currency for trades with China. China has surpassed Japan as the second largest country by GDP. With USD being the settlement currency for international trades in China, its continued depreciation puts additional pressures on importers and exporters, and has resulted in the increased demands and preference for RMB as the settlement currency. Hong Kong, with more sophisticated financial tools, greater access to the global economy, and credibility, has hence been well-positioned as a cross border RMB settlement center, and potentially also a platform to phase the internationalization and development of RMB where the government could test and manage the currency appropriately. Hong Kong accounted for 75% (70.6 billion) of the RMB settled trades during the first half of 2010. It is the strongest offshore RMB clearing center. And with the guideline issued by the Hong Kong Monetary Authority in February increasing the flexibility in development RMB-denominated financial services, financial institutions are developing RMB financial products. As Hong Kong is developing rapidly as an offshore RMB settlement center, the Chinese government sees Hong Kong's importance as its center for foreign funds and capital, while Shanghai remains its center for domestic funds and capital.
Secondly, Mr. Feng explained Closer Economic Partnership Arrangement (CEPA) and its significance. Signed on June 29, 2003, CEPA is a free trade agreement between China and Hong Kong, waiving tariffs of over 700 Hong Kong products, service entry priorities for identified industries in Hong Kong (before WTO) including more relaxed requirements for Hong Kong banks compared to those for other foreign banks, and investment facilitations. Hong Kong has directly benefited from this free trade agreement as shown by its GDP. Lastly, Mr. Feng touched briefly on the establishment of Qianhai, a small area of Shenzhen a short car ride away from both Shenzhen's airport and Hong Kong's airport, as a new economic zone financed by China Merchants Group. This new zone is a test zone designed to capture the essence of Hong Kong, to mirror and experiment the economic success of Hong Kong, and in the future to possibly test and adapt new political reforms as well. If this zone succeeds, changes in other zones and areas of China may follow.
A Q&A session followed and ended with laughter and applause.
Presentation by Mr Ray Feng will also be made available on the website. ---------------------------------------
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