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Central gov't's new measures cement Hong Kong's status as int'l financial center

(Xinhua)

13:03, August 18, 2011

HONG KONG, Aug. 17 (Xinhua) -- Visiting Chinese Vice Premier Li Keqiang attended a forum focusing on the 12th Five-Year Program (2011-2015) and financing and trade cooperation between the mainland and Hong Kong on Wednesday, bringing new policies and measures to support Hong Kong's development.

Analysts in Hong Kong said the new measures meet the needs of Hong Kong's development as a financial center, echoing the consolidation of shaping Hong Kong into the financing, offshore RMB market and asset management centers, a move to help upgrade the city's status as an international financial hub.

Among the six new measures announced by the vice premier, the two specially referring to the support on the financial field are "to consolidate and upgrade Hong Kong's standing as an international financial center" and "to support Hong Kong in developing itself into an offshore RMB center."

Bajum Zhou, senior research fellow with the China Everbright Holdings, told Xinhua that the cement and upgrade of Hong Kong's international financial center status will more and more comply with the expansion of the offshore RMB business in five years or a longer period.

Fang Zhou, assistant chief research officer at the Hong Kong-based One Country Two Systems Research Institute, told Xinhua that though there had been many talks on developing Hong Kong into an offshore RMB center more aggressively, the lack of effective RMB flow-back mechanism and the low yield are always getting in the way.

Fang said the new measures brought by the central government this time have allowed more non-financial corporates to sell RMB bonds in Hong Kong and given the green light to the RMB Qualified Foreign Institutional Investors (QFII), together with the expansion of the issuance of Treasury Bonds, "these steps will undoubtedly advance the development of Hong Kong's offshore RMB market."

The nodding to Hong Kong enterprises' ability to invest RMB in the form of FDI in the mainland is a milestone following the cross-border RMB trade settlement, said Fang, adding the step, which was limited only to a case-by-case basis before, ensures Hong Kong a "pre-emptive advantage."

A report released by the HSBC on Wednesday said it suggests to create a more transparent and standardized framework, giving foreign enterprises greater incentive to select the RMB in their cross-border transactions and potentially to speed up the circulation of RMB funds both in and out of China.

The report said Li's announcement takes the RMB internationalization process to the next stage by enhancing onshore mainland entities' access to the offshore RMB market and by opening up more channels for RMB to flow back to the onshore asset markets.

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