ENG-2011 — Page 121

Financial and Monetary Affairs ❘ 85

The Vice-Premier of the State Council, Mr Li Keqiang, announced on August 17, 2011 a series of measures to reinforce the Central Authorities' support for the development of Hong Kong as an offshore RMB business centre. The measures cover a number of aspects, including further expansion of the RMB trade settlement scheme to cover the whole country, support for the use of RMB for foreign direct investment in the Mainland, introduction of the RMB Qualified Foreign Institutional Investors (RQFII) Pilot Scheme for investing in Mainland's securities markets, pilot arrangement for foreign banks to increase the capital of their Mainland subsidiaries using RMB, and expansion of the issuance of RMB bonds in Hong Kong by Mainland entities (including financial institutions and corporations).

Development of Offshore RMB Business

Benefiting from China's policy to promote greater use of the RMB in external trade and investment, Hong Kong made tremendous progress in offshore RMB business in 2011.

The RMB trade settlement pilot scheme, launched in July 2009, was expanded to cover the whole of China on August 24, 2011. At the end of 2011, there were a total of 187 banks participating in the RMB clearing platform in Hong Kong, of which 165 were branches and subsidiaries of foreign banks and overseas presence of banks in the Mainland. In 2011, the total remittance of RMB for cross-border trade settlement amounted to RMB1,915 billion, more than five times the amount in 2010.

Hong Kong is also the first place outside the Mainland to have developed an RMB bond market. By the end of 2011, there had been 120 RMB bond issues (with a total issuance size of RMB 181.7 billion). In 2011, there was a significant expansion in the range of issuers, from Mainland banks to Hong Kong and international corporations.

Following the revision of the Clearing Agreement signed between the People's Bank of China (PBOC) and the Clearing Bank for RMB Business in Hong Kong (Bank of China (Hong Kong) Limited) in July 2010, all companies and organisations, including all types of financial institutions, were able to open RMB accounts at banks. Restrictions on RMB interbank transfers between personal accounts and corporate accounts have been removed, enabling the financial industry to launch different RMB financial and wealth management products including insurance, equities, and investment funds.

Separately, in August 2010, the PBOC promulgated a notice on a pilot scheme for eligible institutions, including the Clearing Bank and Participating Banks of Hong Kong's RMB clearing platform to invest in the Mainland's interbank bond market, opening up a channel for RMB funds in Hong Kong to invest in the Mainland. So far, the HKMA and 32 Hong Kong banks have been permitted to invest in the Mainland's interbank bond market.