BEIJING- The People's Bank of China (PBOC), the nation's central bank, announced new steps Tuesday to allow Hong Kong lenders to do more yuan-denominated business, giving them a greater opportunity to tap into the mainland's rosy economy.
Hong Kong banks have been providing personal yuan banking services since February 2004.
Yuan deposits saw a 205 per cent jump on a yearly basis, topping 22.6 billion yuan (US$2.8 billion ) in September, according to the Hong Kong Monetary Authority.
"Approved by the State Council, PBOC decided to expand the scope of its clearing arrangement for the yuan business of Hong Kong banks," the central bank said in a statement on its website.
"The agreement of the State Council to expand renminbi business in Hong Kong will strengthen Hong Kong's role as an international financial centre," Hong Kong Financial Secretary Henry Tang said in a statement.
With the new policy, Hong Kong residents who currently do not have yuan deposit accounts will be allowed to exchange up to 20,000 yuan (US$2,473) per transaction per day at local banks, up from the current 6,000 yuan (US$741), the bank said.
Banks would also be allowed to provide yuan exchange services to Hong Kong businesses in the transport, telecommunications, medical care and education sectors.
"The announcement means much more convenience for residents and enterprises both in Hong Kong and on the mainland," Chu Xiaolu, vice-president of the Beijing branch of the Bank of East Asia, told China Daily.
Chu said that this move would stimulate consumer spending of mainland residents in Hong Kong, thus helping boost the Hong Kong economy.
More individuals and companies are using yuan in Hong Kong as its economy becomes increasingly integrated with that of the mainland.
Businesses with yuan bank accounts would be allowed to conduct one-way exchanges of their deposits from yuan into Hong Kong dollars, the central bank said.
Domestic banks would be allowed to raise the daily limit on remittances for each Hong Kong resident to 80,000 yuan (US$9,876) from 50,000 yuan (US$6,173).
Bank of China, the clearing bank, would allow Hong Kong residents to use yuan-denominated cheques for consumer spending in neighbouring Guangdong Province which will be restricted to a daily limit of 80,000 yuan (US$6,173), a spokesman said.
The central bank would also abolish the credit limit of 100,000 yuan (US$12,345) on yuan bankcards issued by Hong Kong lenders.
The new measures would take effect soon after finishing technical preparations, according to the bank.
But according to He Guangbei, the chief executive of Bank of China (Hong Kong), this move will not see a dramatic change to Hong Kong's yuan deposits as the majority of Hong Kong's yuan deposit holders are individuals not institutional investors.
Currently, there are 38 banks in Hong Kong offering personal RMB business to their clients, covering almost all the Hong Kong banks that engage in retail business.
The central bank stressed that the RMB business in Hong Kong must be developed steadily in a sequential manner, consistent with the reform process of capital account liberalization and RMB convertibility on the mainland.
For the time being, it is also impossible to set a timetable for the long-term development of RMB business in Hong Kong, said the central bank.