Crossborder yuan loan scheme begins
HONG KONG: China kicked off its crossborder yuan loan scheme in Qianhai with Hong Kong-based banks signing some two billion yuan (US$321.5mil) in lending to mainland Chinese firms for 26 projects, a banker with knowledge of the matter said.
The agreements are a step towards opening China’s capital account and internationalising its currency.
China had announced it would let firms in Qianhai, a US$45bil special economic zone in Shenzhen near Hong Kong, take out yuan loans from banks in Hong Kong, with tenors and interest rates to be set independently, also a major step towards liberalising the country’s interest rate mechanisms.
Fifteen banks agreed to provide a total of two billion yuan in loans for 26 projects in Qianhai, the banker who attended the signing ceremony said.
The Bank of China Hong Kong Group said yesterday that Bank of China Hong Kong and Nanyang Commercial Bank signed agreements with five enterprises registered in Qianhai, to provide them directly with crossborder yuan loans.
“The new policy offers banks in Hong Kong a new channel to deploy their RMB (renminbi) funds and promotes RMB circulation between the two places, facilitating the development of crossborder RMB business,” said Gao Yingxin, deputy chief executive of Bank of China Hong Kong, in a statement.
Standard Chartered Bank Hong Kong also said it had entered into a crossborder yuan lending framework agreement without elaborating.
China set up the Qianhai business zone offering freer currency movements and Hong Kong professional standards last June. The government released rules in December for companies that incorporate in the area to borrow yuan loans from Hong Kong banks with interest rates and tenors to be fixed independently.
Analysts said the offshore yuan loan market still carried a lower interest rate than the onshore market, which made the offshore yuan loan market attractive to Chinese enterprises. The new loan business will also offer Hong Kong banks more options to diversify their yuan investments, in addition to existing channels such as interbank lending and dim sum bond investments. Banks involved include HSBC Holdings Plc, Hang Seng Bank, Bank of East Asia Ltd and Hong Kong branches of several Chinese banks, such as the Industrial and Commercial Bank of China, China Construction Bank and Agricultural Bank of China.
The outstanding yuan loans in Hong Kong stood at around 70 billion yuan by November 2012, more than double the amount at the end of 2011, according to the Hong Kong Monetary Authority. —