As mainland China broadens yuan’s global appeal, Hong Kong may play larger role

A finance professor has argued the time is ripe for Hong Kong to serve as an offshore hub for the yuan as overseas use of the currency grows

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Increased use of the yuan in global transactions suggests a larger role is on the horizon for Hong Kong as an offshore clearing centre for the currency. Photo: Shutterstock

Published: 6:00pm, 29 Jul 2024

As mainland China attempts to broaden the use of the yuan in international transactions, Hong Kong will likely have a bigger role to play in this process, according to a report released by Renmin University on Sunday.

“We need to proactively use the current window of de-dollarisation and emphasise the stability and low interest rates of our currency to increase the yuan’s share in global trade,” said Chen Zhaojing, a professor in finance at the university.

“We should also deepen reforms in the capital market, boost the development of the bond market, loosen limitations on financing for bonds and expand the size of Hong Kong’s role as an offshore yuan centre,” she said in a presentation for the report on Sunday.

While Hong Kong has long been the biggest offshore clearing centre for the yuan – the mainland’s currency, also known as the renminbi – under present geopolitical and economic conditions, Beijing may see a ripe opportunity for the yuan’s internationalisation.

Since Russia’s invasion of Ukraine in 2022, the yuan has become a regional reserve currency for Moscow as its access to the US dollar has been severely limited following the imposition of sanctions.

China has also been accelerating currency swap deals and designating more clearing banks overseas as trade and geopolitical tensions with the US intensify.