Mr Joseph Yam: proposed Hong Kong foreign reserve investment in renminbi assets

The industry's long-awaited trial of renminbi settlement for Cross-border Trade has just started for a week, and the pilot and discussion on how to further determine the value of the renminbi and its value-added status will begin to unfold synchronously. The chief executive of the Hong Kong Monetary Authority, Mr Joseph Yam, suggested that the Hong Kong region's foreign exchange reserves could be used to invest in renminbi-denominated assets, which he also suggested could allow some stocks to be priced and traded in the two currencies of Hong Kong dollar and RMB.　　At present, the feasibility discussion about the above two kinds of ideas is arousing wide concern in the industry. Lijian, deputy Dean of Fudan University's School of Economics, said the two proposals were designed to meet the renminbi's value-added and value-added needs arising from the surplus of trade positions in offshore renminbi trade settlement. The former can allow investors to hold the renminbi at ease through the development of the renminbi bond market, hedging against inflation risk.　　The latter, through investment, can help companies gain the wealth effect by hooking up with financial products and financial markets. Although Mr Yam's two proposals are open to capital account, market participants do not see any prospect in the foreseeable future. Feng Xiaozhong, general manager of Hang Seng Bank and director of investment and insurance business, suggested that the HKMA could invest in renminbi-denominated assets by investing in the mainland through its QFII quota through external fund managers. In addition, he suggested that a pilot form could be used before the renminbi has not been freely convertible.　　For example, in the future, Agricultural Bank will be listed in Hong Kong to consider using the Hong Kong dollar and the renminbi synchronized limit issue. Lijian pointed out that the depreciation of the dollar and the decline in bond yields also created trouble for Hong Kong's foreign exchange reserves, which is clearly a better option.