Mainland tourists no longer have to seek out money exchange
outlets or banks before they visit Hong Kong.
A growing number of small-sized street eateries and cabbies in
the special administrative region now accept yuan notes, as large
shopping malls and hotels have been doing for years.
Against the backdrop of a stronger yuan and the further
integration of the two economies, the yuan has virtually become the
second most popular currency in this international financial
hub.
This situation prompted a local official and some economists to
say the renminbi would, in the long run, become an international
currency like the US dollar and the euro.
Though that is far from being a reality, Hong Kong could help
expedite the cause with its financial expertise and unique role in
the Chinese economy.
In a predictable future, the special administrative region could
enhance its role as a "testing ground" for a free-floating yuan.
Indeed, Hong Kong's success in conducting yuan business has paved
the way for it to ultimately become an offshore renminbi trading
center.
From February 2004, four types of yuan business deposits,
withdrawals, exchange and remittance were allowed in the city.
Nearly 40 banks began offering these services in less than a
year.
That saw current accounts in renminbi, which track the flow of
transactions such as goods, services and interest payments, opened
outside the Chinese mainland for the first time.
And another significant deregulation was announced yesterday
banks are allowed to issue yuan bonds in Hong Kong.
Hong Kong Financial Secretary Henry Tang said Hong Kong would
negotiate with the mainland on details of the bond-issuance
mechanism and some market watchers said the business could be
launched in a few months.
If so, that will mark the first overseas opening of the capital
account in yuan, which tracks the movement of funds for investments
and loans.
Hong Kong could then become the first overseas host of a fully
convertible yuan.
David Li, a veteran Hong Kong banker who has close ties with the
central government, boldly predicted that Hong Kong would follow
Tianjin to become China's second area able to convert yuan
freely.
(China Daily January 11, 2007)