Macao likely to do RMB trade

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Last updated at: (Beijing Time) Friday, January 09, 2004

Macao likely to do RMB trade

The Macao Special Administrative Region (SAR) is likely to become the second offshore region to conduct renminbi business after Hong Kong, senior officials said yesterday.

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The Macao Special Administrative Region (SAR) is likely to become the second offshore region to conduct renminbi business after Hong Kong, senior officials said yesterday.

"Macao has also applied to conduct renminbi business," said Liu Lianke, deputy director of the International Department under the People's Bank of China (PBOC), the nation's central bank.

"We'll strive to ensure an early implementation,'' he told a seminar yesterday.

Macao sent its application in last December after the PBOC approved banks in Hong Kong to conduct renminbi business, including deposits, exchange, remittance and credit card, providing an official channel for the estimated 700 billion yuan (US$84 billion) of renminbi banknotes circulating in the region to flow back to the mainland.

The mainland's currency is increasingly widely used in the small territory since it was returned to the motherland in 1999. "It was used well before the handover in places like gold shops,'' Wan Sin Long, director of Banking Supervision Department, Monetary Authority of Macao, told China Daily. "Now it's being used anywhere, like department stores and taxi."

The renminbi is fully convertible under the current account but only partly convertible under the capital account.

Although the annual inflow of renminbi banknotes, as recorded at conversion into the local currency of pataca, is estimated at only 2-3 billion yuan (US$240-360 million), tiny as compared to the figure in Hong Kong, the volume is expected to increase as cross-border travel and business exchanges with the mainland grow, he said.

Mainland travellers to Macao numbered nearly 20 million last year, as compared to 17 million in 2002, while the number of the SAR's travellers to the mainland has grown by over 30 per cent annually in recent years, surpassing 5 million in the first 11 months of last year.

"Allowing Macao banks to conduct renminbi business will not only facilitate exchanges between the two sides, but strengthen banking supervision and protect the reputation of renminbi," Wan said.

The status quo has resulted in illegal exchange of the renminbi in the territory, he said.

The new business will also bring more profit to the region's banks that are recovering from the Asian financial crisis and seven years of economic downturn before the handover.

"From a macroeconomic point of view, it has a significance for the development of Macao's banking sector," Wan said. "And it is also of key importance to the implementation of the 'One Country, Two Systems' principle, and the sustainable and stable growth of Macao's economy."

The small size of the region's less-than US$20 billion banking sector has made it more reliable on the growing ties with the mainland than Hong Kong. None of its locally-incorporated banks can meet the mainland's US$6 billion capital requirement, a lowered threshold under the Closer Economic Partnership Arrangement, for opening a branch on the mainland.

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