ENG-2016 — Page 104

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Financial and Monetary Affairs

daily turnover in the RMB Real Time Gross Settlement system stayed at RMB863.6 billion, down 8.8 per cent from 2015. Hong Kong processed some 70 per cent of RMB payment activities, according to the Society for Worldwide Interbank Financial Telecommunication. RMB bank lending dropped 0.9 per cent to RMB294.8 billion between the start and end of the year, and RMB bond issuance also moderated to RMB52.8 billion. Banks in the city handled RMB4,542.1 billion of RMB trade settlement transactions.

Hong Kong is also the world's largest offshore RMB investment product market. Its offerings include listed and unlisted investment funds, insurance products, currency futures, real estate investment trusts, shares and derivatives products. Qualified institutions show interest in developing funds which invest in Mainland onshore markets via the Renminbi Qualified Foreign Institutional Investor (RQFII), Stock Connect or China's Interbank Bond Market (CIBM)8. At the end of 2016, there were 40 fund management companies managing 68 SFC-authorised unlisted funds investing onshore via the RQFII, Stock Connect and/or CIBM with an aggregate NAV of RMB10 billion, and 26 SFC-authorised RQFII/Stock Connect exchange traded funds (ETFs) adopting dual trading counters in RMB and HKD with an aggregate NAV of RMB28.9 billion.

Since February, qualified overseas institutional investors, including Hong Kong insurance companies, have been allowed to invest in the Mainland's interbank bond market without the need for approval from the People's Bank of China.

On 1 October, the RMB was included in the IMF's Special Drawing Right basket of currencies. The move establishes the status of the RMB as a freely usable currency, and would add impetus to the internationalisation of the RMB and the development of Hong Kong's offshore RMB business.

Stock Connect

The Shanghai-Hong Kong Stock Connect has been operating smoothly since its launch in 2014. The programme marks an important step in opening up the Mainland's capital markets and internationalising the RMB. It also reinforces Hong Kong's position as a premier international financial centre and a global offshore RMB business hub. The aggregate quota under the Shanghai-Hong Kong Stock Connect was abolished in August 2016.

Building on the success of the Shanghai-Hong Kong Stock Connect, the Shenzhen-Hong Kong Stock Connect was launched in December, deepening the mutual access between the Hong Kong and Mainland stock markets. It allows international investors to invest more widely in the Mainland's markets through Hong Kong's markets. Through the SEHK, they can trade in not only over 560 shares listed on the Shanghai Stock Exchange, but also about 880 eligible stocks listed on the Shenzhen Stock Exchange. Mainland investors also get more choices, with about 100 Hong Kong-listed small cap stocks available through the Shenzhen-Hong Kong Stock Connect.

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The unlisted funds and ETFs that invest in the Mainland onshore markets via the RQFII, Stock Connect or CIBM are RMB-denominated funds which primarily invest in Mainland securities markets through the RQFII quota, Stock Connect or CIBM.

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