Hong Kong hopes to roll out more new renminbi-denominated financial products faster, cementing more various renminbi financing and investment channels, and leading the promotion of Hong Kong as a leading international offshore renminbi finance hub.

Hong Kong Monetary Authority Chief Executive Eddie Yue Wai–man made the remarks on Friday at the Treasury Markets Summit 2024, organized by the HKMA and Treasury Markets Association.

Yue said medium-term cyclical factors and long-term structural factors support the promising outlook of renminbi internationalization.

“The accommodating monetary-policy environment on the mainland, announced two days ago, is expected to continue, and that will provide incentive for banks and corporations to frequently use the renminbi as a funding currency,” Yue said.

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“More mainland corporations are seeking overseas expansion as the global supply chain reconfigures trade and investment cooperation between the Chinese mainland and the Association of Southeast Asian Nations, the Middle East, and other Belt and Road countries,” the chief executive added.

According to HKMA statistics, renminbi bank lending in Hong Kong tripled in just three years to nearly 600 billion yuan ($85.6 billion) in July this year. The turnover of the Stock Connect and Northbound Bond Connect amounted to 161 billion yuan and 45 billion yuan respectively in the first seven months of this year, representing increases of 50 percent and 132 percent respectively from the same period in 2020.

Yue stressed that to propel renminbi internationalization, policymakers and market participants in Hong Kong should work together to improve the four specific areas of liquidity, products, infrastructure and outreach.

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To enhance renminbi liquidity, Yue said, the city’s offshore yuan liquidity is basically enough at the moment, but it needs more because further efficiency gains will likely be increasingly marginal based on the current business scale. “We already studied possible ways to enhance the availability of renminbi liquidity to banks, in enabling to meet the time demand for renminbi funding, which we will see continuing to grow in the next few years.”

Yue said that the HKMA is looking forward to the inclusion of the dual trading counter in the Southbound Stock Connect, as to add more liquidity to that market.

Regarding the infrastructure to handle the vast volume of renminbi transactions, Yue said the upgrading of the central money markets unit is a major revamp. “We need to make this operation a lot more commercialized, customer-orientated and market-friendly.”

He said that because the renminbi is one of the central bank digital currencies used in mBridge, this is another opportunity to allow more frequent use of the renminbi in cross-border payment in international trade.

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Yue thanked the active participation and the engagement of the Hong Kong’s banking industry in ASEAN and Middle Eastern countries, which greatly enhance the understanding and raises interest in the benefits and potential in the wider use of renminbi in trading and investment activities

Liu Jing, Greater China chief economist at HSBC Global Research, said that whether the renminbi can become an investment currency depends on whether the currency is appreciating or depreciating, and it also needs the equity market to be strong as well.

“In the first half of this year, when the renminbi faced depreciation pressure, the renminbi globalization index we compiled indicates it reached a new high in the first half, benefiting increased renminbi deposits and increased use of the renminbi in cross-border trade,” said Ding Shuang, head of Greater China and North Asia Economic Research at Standard Chartered Bank (Hong Kong).