Banks to offer RMB cheque settlement system
Source: CCPIT TEX Date: 2006-03-03
Hong Kong residents travelling to South China's Guangdong Province will be able to make payments from Monday with renminbi (RMB) cheques that will be cleared in Hong Kong, a further expansion of Chinese currency services in the territory.
That is part of the services included in a new RMB settlement system, to be jointly launched by Hong Kong Monetary Authority (HKMA) and the Bank of China (Hong Kong) (BOCHK).
The move comes following the approval of the State Council and the People's Bank of China (PBOC), the mainland's central bank, last November. The new RSS includes a clearing and settlement system for RMB cheques drawn on banks in Hong Kong for consumer spending in Guangdong, an automated system for remittance processing, RMB bank card payments and RMB position-squaring, and a real-time enquiry service for participants of the system.
With the RMB cheque-clearing mechanism, Hong Kong residents can open RMB current accounts with banks in Hong Kong and make payments by cheque for consumer spending in Guangdong Province. The limit of aggregate payment for each RMB current account is 80,000 yuan (US$10,000) per day.
The BOCHK was appointed by the PBOC as the clearing bank for RMB business in Hong Kong in December 2003.
As many as 42 banks and credit card companies joined the RSS, of which 27 banks will start RMB cheque services from next Monday.
"The new RSS will provide a safe and efficient clearing and settlement platform to support the further expansion of RMB business in Hong Kong," said Joseph Yam, chief executive of the HKMA. "It is an important addition to Hong Kong's financial infrastructure, particularly in the light of the closer economic and financial relationship between Hong Kong and the mainland."
He Guangbei, vice chairman and chief executive of BOCHK, said: "Since the introduction of RMB services in Hong Kong in February 2004, the RMB clearing service provided by BOCHK has been operating smoothly."
He added that the new RSS services is a quality-clearing platform for RMB business, and would therefore lay down a foundation for the further expansion of RMB business in Hong Kong.
Raymond So, associate professor of the Department of Finance, Chinese University of Hong Kong, welcomed the launch of the new system, saying that would be a strategic move to pave the way for the introduction of qualified domestic institutional investor (QDII) regime.
It also helps consolidate Hong Kong's role as the international hub for mainland's offshore financial centre, he said.
"Having established the much-needed RMB settlement system at this stage would make Hong Kong well-prepared for the full opening of capital account," So said.
He also said more measures need to be taken such as allowing Hong Kong to issue RMB-denominated debts to keep Hong Kong's competitiveness ahead of other regional rivals.
The future of Hong Kong's financial role lies in the widening of the offshore RMB business and maximizing the city's role as a truly mainland-focused international market, Hong Kong Financial Secretary Henry Tang said in his third budget speech last month.
Tang in his speech had proposed to widen the scope of RMB business in the face of the surging international demand for cross-boundary trade to settle payments in RMB and to establish a RMB debt issuance mechanism in Hong Kong.
Last year, 38 banks in Hong Kong provided RMB deposit, withdrawal, exchange and remittance services.
The total RMB deposit in Hong Kong has reached 22.6 billion yuan (US$2.9 billion), and the cumulative value of spending and cash withdrawals using RMB debit and credit cards in Hong Kong amounted to HK$9.4 billion (US$1.21 billion).
