Hong Kong and Mainland extends currency-swap pact

The agreement and its expansion seen to allow more flexibility for the development of renminbi business in Hong Kong.

The Monetary Authority and the People’s Bank of China signed a renewed currency swap agreement Tuesday for a term of another three years, with its size expanded to RMB400 billion/HK$490 billion.

Financial Secretary John Tsang said the renewal of the currency-swap agreement and its expansion will allow more flexibility for the development of renminbi business in Hong Kong.

“It is conducive to the strengthening of Hong Kong’s status as an offshore renminbi business centre,” Mr Tsang said.

This new agreement supersedes the RMB200 billion/HK$227 billion currency-swap agreement signed on January 20, 2009.

When signing the currency-swap agreement, Monetary Authority Chief Executive Norman Chan said with the strong support from the Central Government and the Mainland authorities, the development of Renminbi business in Hong Kong has made encouraging progress over the past year.

“The renewal and expansion of the currency swap agreement is crucial in helping us to provide liquidity, when necessary, to maintain the stability of the offshore renminbi market in Hong Kong,” Mr Chan said in an HKMA report.

During the first three quarters of this year, renminbi deposits in Hong Kong nearly doubled to RMB622 billion, while renminbi trade settlement conducted through banks in Hong Kong amounted to more than RMB1,300 billion.

In October 2010, the Monetary Authority activated the swap for RMB20 billion to support renminbi trade settlement in Hong Kong thereby facilitating steady development of the business.