Yuan settlement of trade between Hong Kong and China more than doubled to 7.2 billion yuan ($1.05 billion) in May, compared with as much as 3 billion yuan in both March and April, the Hong Kong Monetary Authority said.
Settling of transactions using China’s currency improved after the HKMA explained settlement rules, Norman Chan, chief executive of the city’s defacto central bank, told a press briefing. The regulator and the People’s Bank of China plan in July to adjust rules on banking to allow people to buy yuan-denominated funds and insurance products, he said.
China approved use of yuan to settle cross-border trade with Hong Kong in June 2009, part of a drive to broaden the use of the currency and reduce reliance on the U.S. dollar. The State Council approved the expansion of a trial for cross-border yuan settlement to 20 provinces, the Xinhua News Agency reported yesterday, citing the People’s Bank.
The expansion won’t pose threat to Hong Kong, Chan said. Instead, it will boost trade settled in yuan in the city, he said.
Chan said in October, when he began work as the head of the HKMA, that he wanted to consolidate Hong Kong’s status as an international finance center and expand the city’s role in helping China promote the yuan’s use for commerce and investment abroad.
China has effectively pegged the yuan against the dollar since July 2008 to help exporters whether the global financial crisis. In the previous three years, it strengthened 21 percent against the dollar.
Five institutions, including two international issuers, will sell yuan bonds “very soon,” said Peter Pang, deputy chief executive at the HKMA.