The Hong Kong Stock Exchange’s “Hong Kong dollar-RMB dual-counter model” will be officially launched on the 19th of this month, which is another important milestone in the development of Hong Kong’s capital market. The status of the largest offshore RMB center further promotes the process of RMB internationalization.
Since the launch of personal RMB banking business in 2004, Hong Kong has been giving full play to its advantages as an international financial center and has become a reliable “testing ground” for the opening up of the mainland’s financial sector, allowing the RMB to gradually go international. Hong Kong itself has also developed into a global offshore RMB business center. And strengthen its role as a bridge connecting the mainland and international capital markets. As of the end of last year, the total amount of RMB deposits in Hong Kong was close to RMB 1 trillion, and it handled about 75% of the global offshore RMB payments.
While the pool of funds continues to grow, the demand for RMB investment and transactions also continues to increase. In the long run, if Hong Kong wants to consolidate its leading position as an offshore RMB business center, it needs to continue to work hard in terms of liquidity, products and infrastructure, especially enriching the types of RMB-denominated products. The dual-counter model of the Hong Kong Stock Exchange is an important step in the development of diversified RMB-denominated products, providing local and overseas investors with the option to allocate RMB assets.
Strengthen offshore RMB circulation
The new model allows investors to trade and settle shares included in dual counter trading in Hong Kong dollars and Renminbi respectively. The securities under the two counters belong to the same category of securities and can be converted into each other without changing the beneficial ownership. Investors can buy stocks in Hong Kong dollars and sell them in RMB, or buy in RMB and sell them in Hong Kong dollars. Investors can better choose and trade currencies according to their own investment preferences, allocation needs, market judgment and risk tolerance, and better disperse, manage, hedge and reduce exchange rate risks and exchange costs.
The dual-counter model can not only enhance the competitiveness of the Hong Kong securities market, but also activate the offshore RMB circulation in Hong Kong and further promote the internationalization of the RMB. It is worth noting that the dual-counter model will be mainly for local and overseas investors at the initial stage, while the “Northern Water” in the Mainland – Southbound Hong Kong Stock Connect traders still need to further relax the policy. At that time, Hong Kong Stock Connect transactions will be further promoted to satisfy the mainland To meet the needs of diversified allocation of funds and assets, and to enhance the development momentum of Hong Kong’s financial market.
In the face of the general trend of RMB internationalization and overseas investors focusing more on diversifying their investments in a single currency, this presents an excellent opportunity for Hong Kong to consolidate and enhance its status as an international financial center. In the future, we will continue to develop RMB-denominated investment tools and channels, strengthen exchange rate and interest rate risk management, continue to increase the depth and breadth of the RMB market, and improve the development of the offshore RMB ecosystem.
Li Minbin
Deputy Director of the Social and Legal Affairs Committee of the CPPCC National Committee
Original Title: Public Discussion on Political Economy｜Double counter model promotes RMB internationalization
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