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HK rmb debt market plan test for yuan
(Reuters)
Updated: 2006-02-22 17:32 China may allow the issue of yuan bonds in Hong
Kong and permit cross-border trade to be settled in yuan, Hong Kong's financial
secretary said on Wednesday, presaging another step towards a freer-floating
currency.
Calling Hong Kong a "testing ground", Financial Secretary Henry
Tang said the two measures under consideration would spur bilateral trade while
developing the city's bond markets.
If the proposals were approved, Hong Kong would benefit by being the only
place outside Chinese mainland to host trading in yuan-denominated
securities.
Economists said a market in such bonds may dampen speculative inflows into
China betting on yuan appreciation. It might also shed more light on the market
value of the yuan, also known as the renminbi (rmb), which can be converted for
trade and foreign direct investment but only for limited capital transactions.
But they did not expect Beijing to allow such a market to expand rapidly in
the short term.
Tang did not say when -- or if -- he expected the twin proposals to win
approval.
"They are vitally important in reinforcing our position as an
international financial centre, and will at the same time provide a testing
ground for the move towards full rmb convertibility," Tang said during his
annual budget speech.
"We need, however, to synchronise in tandem with the pace of financial reform
on the mainland and move forward gradually."
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