By Baron Laudermilk
John Tsang, the Financial Secretary of Hong Jong, said at the RMB Cross-border Trade and Investment Forum on July 23rd 2011, that as a Special Administrative Region of China and working under the principle of ne Country, Two Systems Hong Kong will continue to be the ront and center of the RMB liberalization process.
Tsang said Hong Kong role as China global financial hub requires tapping into and building relationships with other worldwide financial centers, and that Hong Kong will continue to be the world main and possibly only RMB offshore hub for the foreseeable future.
"In particular, we see important opportunities in diversifying the range of RMB products, deepening the RMB market and making the best use of Hong Kong as the leading offshore center for RMB-denominated business, he added.
Tsang said that Hong Kong has established stable platform for developing offshore RMB business supported by three sturdy pillars, namely RMB banking, bond issuance and trade settlement. The mutually supportive nature of these three pillars is crucial. Together they provide the key ingredients for stable and balanced development of offshore RMB business. They generate offshore RMB liquidity, they open the door for international players to engage in RMB markets, and, perhaps most importantly, they create market-driven demand for RMB financial products. /p>
Mark Boleat, chairman of the Policy and Resources Committee for London, recently said at a press conference in Beijing that despite the fact that Hong Kong is currently in the position to be the heart of the RMB liberalization process, London one day will also be at its scale or become even more significant, mainly because it has the largest trading markets in the world. However, Boleat did point out that London government does not perceive London RMB development as a race with Hong Kong. Instead it will develop at its own natural speed.
It is difficult to disagree with Tsang opinion that Hong Kong has established a stable platform for developing the RMB offshore businesses. It is currently the only city that is legally considered an RMB offshore hub by Beijing, and the government has supported this via favorable policies. However, some analyst do predict that as Beijing opens the currency and deregulates it, other major financial centers, such as New York, Taipei, Singapore, London and Tokyo will also become main players. But as of now, and for at least the next few years, Hong Kong will stand as the world only major RMB offshore center.
