The dollar is still the number one currency. However, China is working to change that and needs to strengthen the role of its own currency. Beijing wants to boost its currency with a new role, the renminbi (yuan) in international payments and thereby reduce its dependence on the dollar.
To achieve this, the government will soon allow foreign investors to use the offshore yuan funds to buy up to 20 billion yuan worth of securities in the mainland, said Vice-Premier Li Keqiang on Wednesday during a visit to Hong Kong. Moreover, China wants to strengthen Hong Kong’s importance as offshore yuan trading center outside of mainland China.
Li held the meeting together with central bank chief Zhou Xiaochuan in Hong Kong, where sold the largest offshore bond in yuan. Also, companies from Chinese mainland, according to the plans, may soon be allowed to sell yuan-denominated bonds (up to 50 billion yuan) in Hong Kong.
The new measures provide a big boost to the offshore yuan development. So far, investors in Hong Kong only have very limited options to their yuan assets. “With the availability of other investment opportunities, Hong Kong companies and savers to take advantage of the renminbi in the future and more willing to hold,” said Yong Chen of Huatai United Securities in Shanghai.