Subject: MOTION ON “STRENGTHENING HONG KONG’S FUNCTION AS AN OFFSHORE RENMINBI BUSINESS HUB TO CONTRIBUTE TO THE RENMINBI INTERNATIONALIZATION PROCESS
President, the motherland possesses sufficient economic resilience. The Renminbi (“RMB”) exchange rate is stable, and the scale of its external trade remains firmly in first place globally, thus providing a solid economic foundation and broad room for growth for high-quality development of the offshore RMB market. I am grateful to Prof Michael NGAI for moving this motion. I agree with the advocacy in the original motion. Improving financial infrastructure, broadening application scenarios, promoting product innovation and enhancing market liquidity are all core pathways for Hong Kong to consolidate its status as an offshore RMB hub and serve the country’s construction of a financial powerhouse. I have made additions to the original motion, primarily with a view to further refining the content and clarifying some key points regarding the development of offshore RMB.
First of all, the clearing system is the core infrastructure underpinning the stable operation of the offshore RMB market. With the aim of developing as a world-leading offshore RMB clearing hub, Hong Kong is working to enhance the coverage and competitiveness of its clearing system. Currently, Hong Kong processes approximately 75% of global offshore RMB payments and settlement. However, there is still room for further expansion in terms of scale and regional coverage. The mechanism for operating across time zones under the RMB Real Time Gross Settlement (RMB RTGS) System should be optimized to enhance clearing efficiency, and attract more international financial institutions to join Hong Kong’s clearing and correspondent banking systems, particularly those from countries along the Belt and Road, as well as emerging markets such as the Middle East and Latin America, thereby strengthening Hong Kong’s radiating effects and global influence.
As the application scenarios of offshore RMB continue to expand, Hong Kong also needs to simultaneously refine its medium to long-term financing layout. Currently, the loan-to-deposit ratio has reached 97%, but market liquidity mainly relies on short-term interbank lending, repurchase and short-term deposit instruments. Medium to long-term financing has yet to be broadened to meet the demand for offshore long-term asset allocation, project financing for multinational institutions, long-term capital expenditure for corporate entities. etc. To expand the scale of the offshore RMB liquidity pool on a continuous basis and enhance liquidity in the secondary market, the SAR Government should, in the coming years, collaborate with central financial authorities such as the People’s Bank of China, the State Administration of Foreign Exchange and the Ministry of Finance to jointly build a more vibrant ecosystem for medium and long-term financing of offshore RMB. For example, a regular offshore RMB bond issuance programme can be established to promote diversified issuance mechanisms for sovereign bonds, local government bonds and commercial corporate bonds. Maturities should also be extended, with more 20-year, 30-year and even longer-term bonds being issued. This would help construct a comprehensive yield curve with reference values to attract global patient capital, facilitate steady growth in financing scale, and establish an offshore RMB investment and financing centre that links the Mainland and radiates globally.
Furthermore, RMB cross‑border trade settlement is directly related to its international currency status. In the first two months of this year, total remittances for RMB cross-border trade settlement in Hong Kong reached RMB1.9 trillion. As shown by the latest SWIFT report, RMB accounts for approximately 2.74% of international payments, ranking sixth globally, which does not yet reflect China’s position as the world’s largest trading nation in goods. In the future, efforts should be made to drive rapid growth in offshore RMB settlement and increase its penetration rate. In the past, offshore RMB settlement has been concentrated among traditional trading partners. Under the impact of recent geopolitical factors, our country has restructured its foreign trade landscape in recent years. For instance, the Association of Southeast Asian Nations and our country have been the largest trading partner of each other for six consecutive years. As the scale of trade with these countries continues to expand, the primary task is to actively encourage and guide enterprises in these partner regions to prioritize the use of offshore RMB settlement in cross‑border trade. Concurrently, efforts should be made to streamline the cross‑border trade settlement process, raise processing efficiency, and enhance the incentives for using RMB settlement.
My amendment seeks to further enrich the proposals in the original motion regarding the first five-year plan to improve the framework for the development of offshore RMB. In addition to the aforesaid measures, Hong Kong needs to continue to optimize and expand various mutual market access mechanisms, improve liquidity provision and adjustment mechanisms, and deepen regional cooperation. I hope the SAR Government will make good use of our existing advantages, fully address our weaknesses, and expand the depth and breadth of the offshore RMB market, thereby contributing to the RMB internationalization process to achieve leapfrog development.
President, I support the original motion. I also implore Members to support my amendment. I so submit.