Hong Kong’s pool of yuan capital isn’t substantial and doesn’t pose a threat to financial markets on the mainland, K.C. Chan, the city’s secretary for financial affairs and the treasury, said on his blog.
Chan said media reports that hedge funds are hoarding 10 trillion Hong Kong dollars ($1.29 trillion) of capital in the city to enter mainland markets were inaccurate. It’s unlikely that the money going from Hong Kong to China will be used for short-term speculation because all the flows must be approved by Chinese regulators, he wrote.
The prospect of yuan appreciation and economic growth that’s averaged 10 percent for the past five years are attracting funds to China. The central bank has allowed the yuan to appreciate 2.6 percent since scrapping a two-year peg on June 19. The Shanghai Composite Index has rallied 18 percent since June, after sliding 27 percent in the first half of 2010.
Yuan deposits in Hong Kong jumped by a record 67.8 billion yuan ($10 billion) in October to 217.1 billion yuan, the Hong Kong Monetary Authority said on Nov. 30.
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