Hong Kong has long held the position of being at the centre of international finance, a position that is expected to grow stronger as it strives to become the leading offshore Renminbi (RMB) hub in accordance with China’s 15th five-year plan.
Financial Secretary Paul Chan Mo-po has unveiled plans in his latest Budget speech which will see Hong Kong as the marketing tool for launching the RMB on the world’s stage. Hong Kong will become the platform for the issuance of RMB bonds on a regular basis by tapping emerging markets to bring in more cross-boundary RMB transactions to the city.
A major incentive to use the RMB was launched by the Hong Kong Monetary Authority (HKMA) earlier this month when it increased the RMB Business Facility (RBF) to RMB 200 billion to provide banks with a stable and relatively low-cost source of RMB funds.This facility enables banks to offer RMB financing to their corporate clients, thereby promoting the wider use of the RMB in the economy. RBF channels onshore RMB liquidity into offshore markets, with Hong Kong serving as a hub for these transactions.
With China’s Belt and Road Initiative (BRI) spreading throughout Asia, the Middle East and Africa there is now less dependency on the US dollar as the international currency for trade and a stronger dependency for the yuan, thus enhancing China’s influence in the global financial system.
As of late February, the yuan is trading around 6.85–6.89 per US dollar, reflecting a strengthening trend for the yuan and a weakening dollar due to shifting trade policies and interest rate environments. The decline in the US dollar has been driven by expectations of Federal Reserve rate cuts and uncertainty surrounding US tariffs.
Offshore RMB hubs are now established across Asia, Europe, North America and Australia and include places like the USA, Canada, Australia, Hungry, France and Germany to name just a few. But Hong Kong is still the leading hub, attracting some 70 per cent of all RMB deposits. Dim sum bonds – yuan-denominated notes issued outside mainland China – have become a mainstream financing tool as tech firms and global companies tap deeper yuan liquidity amid a stronger currency.
Under the 15th five-year plan there are a number of recommendations which the financial secretary has adopted in his budget to fall in line with Hong Kong’s first five-year plan. Hong Kong will promote more convenient foreign exchange quotations and transactions between the RMB and other regional currencies to reduce transactions costs; enrich mutual market access by exploring with the mainland how to expedite the issuance of mainland government bond futures in Hong Kong, plus the inclusion of real estate investment trusts (REIT) in the scheme.
Hong Kong's financial market has performed strongly, and its financial system remain robust. Chan said the city will continue to consolidate its existing strengths, tap into emerging fields, strengthen market systems and risk control and deepen financial cooperation in the Greater Bay Area (GBA). By doing so, Hong Kong will enhance its role as an international financial centre on all fronts and contribute to the national strategic goal of "accelerating China's development as a financial powerhouse".
To better align with the 15th Five-Year Plan's deployment for the RMB internationalization, Hong Kong must further deepen and broaden its RMB financial market, gradually developing a toolbox of RMB risk management tools comparable to those of the US dollar and euro in terms of interest rates, exchange rates, and commodities, thereby enhancing the confidence of domestic and foreign institutions in using these tools with peace of mind and ease of use.
The Security and Futures Commission (SFC) and the HKMA are actively implementing the “Roadmap for the Development of Fixed Income and Currency Markets” announced last year. It includes boosting issuance in the primary market, enhancing liquidity in the secondary market, and expanding offshore RMB business. The electronic bond-trading platform will also be launched in the second half of this year, thereby reinforcing Hong Kong's position as a global fixed income and currency hub.
The budget implements various effective measures outlined in the Chief Executive’s (CE) Policy Address. The CE, John Lee Ka-chiu, said the Budget leverages Hong Kong's unique advantages of being connected to both the mainland and the world under the "one country, two systems" principle in actively pursuing economic growth, advancing development, improving people's livelihood, seizing new development opportunities, and better integrating into and serving the overall national development.
Overall, the Budget was upbeat, highlighting Hong Kong’s role in international finance markets. It paves the way for a bright future for Hong Kong by following guidelines in a five-year planning process.
Currently, the Hong Kong dollar is pegged to the US dollar at 7.75-7.85 range, but as the US dollar weakens, so does the Hong Kong dollar. Maybe, just maybe, in the not-too-distant future it will be time for Hong Kong to change its peg to a more stable currency…such as the RMB.
Mark Pinkstone
** 博客文章文責自負,不代表本公司立場 **
The question floating around political pundits is whether the United Kingdom has a right to interfere in Hong Kong affairs by publishing a six monthly report on the city it once ruled.
And according to the 90 elected members of the Legislative Council, the answer is a resounding NO!
Last week the UK Secretary of State for Foreign, Commonwealth and Development Affairs (FCDA), Ed Miliband, released his semi-annual report on Hong Kong, which centered mainly about the detention and release of convicted felon Jimmy Lai Chee-Ying, jailed for 20 years for collusion and incitement, and ramifications of Hong Kong’s National Security Law (HKNSL).
Miliband said in his report that he was “deeply concerned and disturbed by the continued imprisonment of Jimmy Lai,” adding his call for Lai’s “immediate release.”
This brought the immediate wrath of the legislators and government officials. The legislators issued a statement stating that Miliband’s report was “a blatant trampling on the rule of law and a gross interference in Hong Kong’s judicial independence.” It added that the UK Government's so-called report groundlessly attacks on Hong Kong's judicial system and trials, and even unreasonable demands of the release of convicted persons, is overtly placing politics above court judgments.
But, the UK Government is in no position to criticize Hong Kong. Its track record is far from perfect. The Sino-British Joint Declaration is not a human-rights treaty with ongoing monitoring mechanisms; its object and purpose were fully exhausted in 1997 upon China's resumption of sovereignty. Therefore, Post-handover governance is anchored strictly in China’s Constitution and the Basic Law, making any claimed UK "supervisory" role a political invention rather than a legal right. Hence, it cannot simultaneously function as an instrument of legal supervision.
The UK maintains at least 14 national security laws, treating each of them as practical necessities. The UK National Security Act 2023, implemented after the Hong Kong and China national security laws were in place, even received a strong backlash at home for its legal over breadth, retroactivity and vague espionage definitions.
While damning Hong Kong’s NSL, it hypocritically applied its own NSL extraterritorially against Hong Kong’s London Office. Last year alone, the UK authorities arrested more than 3,000 people under its counter-terrorism and security laws.
Miliband has no right to lecture Hong Kong on human rights when the UK’s Rwanda policy was severely criticized worldwide over its treatment of asylum seekers when it introduced legislation to override the Human Rights Act and ignore the European Court of Human Rights interim measures.
The UK report criticized the delays in bringing HKNSL cases to court In Hong Kong. Justice takes time as the UK fully realizes when faced with a backlog of some 80,000 untried cases at the end of the year, with many of the defendants facing years-long delays. The criminal justice in the UK is on the brink of collapse.
The Hong Kong Special Administration Region’s (HKSAR) Government also issued a lengthy rebuttal strongly condemning and firmly rejecting the UK's attempt to make misleading and irresponsible remarks about Hong Kong matters, distort facts and reverse right and wrong, and attempting to interfere in the HKSAR Government's law-based governance by despicable political maneuvers.
The legislators argue that the UK has no sovereignty, jurisdiction or right of supervision over the HKSAR, and has no right whatsoever to interfere in the affairs of the Region. They say that the Joint Declaration between the UK and China on the future of Hong Kong is not an "international treaty" that confers upon the UK any continuous right of supervision over the HKSAR after its return to the motherland.
The UK report portrays Hong Kong's improvement of national security legislation and law enforcement as an erosion of rights and freedoms, while deliberately evading a fundamental fact: prior to the implementation of the HKNSL, Hong Kong experienced severe violent turmoil, public order was severely impacted, and the personal safety and normal lives of citizens were directly threatened. Following the implementation of the HKNSL, Hong Kong society has restored peace and order, providing a solid foundation for developments in Hong Kong's economy, people's livelihood and other aspects.
The Hong Kong government statement said Hong Kong did not authorise the UK to interfere in Hong Kong's affairs after its return to the motherland. It added that: “The HKSAR Government strongly urges the UK again to discern facts from fallacies, respect the international law and basic norms governing international relations, and immediately stop its long-arm jurisdiction and interference in Hong Kong matters, which are purely China's internal affairs."
The UK, like Hong Kong, introduced national security laws to safeguard its citizens. In Hong Kong’s case, national and local national security laws were introduced when the city was faced by wanton destruction during the 2019-20 riots, which resulted in 10,000 arrests made and more than 5,000 petrol bombs seized. The HKNSL successfully restored public order and halted widespread violence, proving its necessity against a public-order crisis that standard legal frameworks at the time it could not contain.
The British document did not give the basis or authority of the report. There does not appear to be any legal requirement for the FCDO to present the six-monthly Hong Kong report to the British parliament, but it does so as a matter of courtesy for members to debate the Hong Kong issue. It is also used by civil society organizations such as Hong Kong Watch, which explicitly rely on these reports to assess human rights conditions and the state of Hong Kong’s autonomy.
Perhaps it is time to give up the report and let the politicians do their own homework.
