While pushing for currency swap deals with various countries to safeguard against the global financial crisis, China will now also encourage foreign investors to use Chinese currency for trade and investment in Hong Kong.
The Chinese Government will also push forward joint ventures for stock exchanges in the business hubs of Hong Kong, Shenzhen and Shanghai, as well as introduce exchange-traded funds on both the Hong Kong and mainland stock markets, state-run China Daily reported today.
The moves are part of a package of policies for Hong Kong ahead of the 15th anniversary of its return to China on July 1. The autonomous enclave of Hong Kong returned to Beijing’s fold 15 years ago.
China in the recent months is pushing currency swap deals with various countries.
On June 22, China and Brazil signed an agreement to allow their respective central banks to exchange local currencies worth up to 60 billion reais or 190 billion yuan ($30 billioin).
In March this year, China signed a swap deal with Australia worth about $31 billion to promote bilateral trade and investment. It has also inked currency pacts with Hong Kong and Japan.
Analysts said Beijing has been trying to push for trade to be settled in yuan, rather than in US dollars, as part of its plans to seek a more global role for its currency.
In another development, China’s Finance Ministry said here today that it will issue 23 billion yuan ($3.64 billion) in yuan-denominated sovereign bonds in Hong Kong as an effort to support the enclave’s economy.
The issuance is the fourth and largest of its kind, following the sale of six billion yuan in yuan-denominated treasury bonds in 2009, eight billion yuan in 2010 and 20 billion yuan in 2011.
The development of Hong Kong’s offshore yuan businesses accelerated rapidly last year, as the total yuan trade settlement value in Hong Kong increased more than four times over 2010, the Hong Kong Monetary Authority said in a document released in late February.
As a prime platform for offshore yuan trade settlement, Hong Kong’s banks handled a record 1.91 trillion yuan ($300 billion) in such trade last year, up 419 per cent from 369.2 billion yuan a year earlier, the city’s de facto central bank said.