HK rmb debt market plan test for yuan (Reuters) Updated: 2006-02-22 17:32 Beijing dropped the yuan's long-standing peg against the dollar in July, and
has long said it would eventually make the currency freely convertible.
PILOT SCHEME
Economists said Hong Kong was the logical choice for monitoring how the yuan
would respond to market forces.
James Malcolm, a currency strategist with Deutsche Bank in Singapore, said it
made sense to launch a pilot scheme in Hong Kong, where Beijing can keep
close track of it, but he described it as just an incremental step towards
liberalisation.
"It's like an incubator for experiments. It'll start very very small,"
Malcolm said.
"In the longer term, they plan to open the capital account," said Bank of
East Asia economist Paul Tang. "It makes sense to do it on a small scale in Hong
Kong."
The immediate impact of such a market would be more localised, providing an
investment outlet for the nearly $3 billion worth of individual yuan deposits
that have accumulated since Hong Kong's banks were allowed to take them in early
2004.
Yuan deposits in 38 Hong Kong banks hit 22.6 billion yuan ($2.8 billion) at
the end of 2005; spending and cash withdrawals in 2005 using yuan-denominated
bank cards reached HK$9.4 billion.
Economists said prospective issuers of yuan debt included Hong Kong-based or
foreign firms that exported to Chinese mainland and thus raked in
yuan-denominated revenue, and also investors that owned Chinese-based assets
such as factories.
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