Currency settlement moves forward
Updated: 2009-03-17 06:57
By Joey Kwok(HK Edition)
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HONG KONG: The SAR and the central government inaugurated cross-boundary payment arrangements yesterday marking a new era in trade relations. The new arrangements also mark another step in strengthening financial infrastructure cooperation between the two economies, the Hong Kong Monetary Authority said.
The arrangement covers cross-boundary payment and settlement in four currencies - the Hong Kong dollar, US dollar, euro and British pound.
The People's Bank of China (PBoC) and the Hong Kong Monetary Authority (HKMA) signed a memorandum last week, allowing specific banks in Hong Kong and the mainland to use connected real-time gross settlement systems.
"These arrangements will deepen the ongoing promotion of financial cooperation between the mainland and Hong Kong and mark the introduction of a wide-ranging cross-boundary payment and settlement mechanism covering multiple currencies," the PBoC and HKMA said in a joint statement.
The two central banks may develop the cross-boundary payment arrangements to include other currencies, depending on market demand.
Responding to the yuan-settlement arrangement in Hong Kong, Financial Secretary John Tsang said hong Kong has been preparing to evolve into a yuan-settlement centre.
Tsang expects the new measures will broaden renminbi business in the territory. He said he hopes the scheme can be implemented as soon as possible.
Premier Wen Jiabao said at the end of the National People's Congress meeting that the central government has already drawn up measures for the yuan-denominated settlement between Hong Kong and the mainland.
China Construction Bank Corporation, Bank of China Limited, Industrial and Commercial Bank of China Limited and Shanghai Pudong Development Bank Company Limited are the first four banks to handle cross-boundary payments in foreign currencies.
The mainland lenders have also appointed China Construction Bank Corporation, Hong Kong Branch, Bank of China (Hong Kong) Limited, Industrial and Commercial Bank of China (Asia) Limited and Citibank (Hong Kong) Limited as their respective agent banks in Hong Kong.
The participating banks will benefit from enhanced flow in liquidity and management as well as increased competitiveness in cross-boundary payment services, the authority said.
Raymond So, an associate professor of finance at the Chinese University of Hong Kong, said banks in Hong Kong can benefit from the cross-boundary payment arrangements, since settlements are permitted in more foreign currencies.
"The arrangements will provide more cooperation opportunities for banks in Hong Kong and the mainland, especially in business involving foreign currency exchanges," So said.
He expects that more cross-border financial arrangements between the mainland and Hong Kong will be implemented in the future.
"The foreign-exchange business on the mainland may further expand to foreign currency trading and deposit following the arrangements of cross-boundary settlement," So added.
(HK Edition 03/17/2009 page16)