Speaking at the Association of Luxembourg Fund Industry (Alfi) Global Investment Funds conference in Luxembourg last week, Lam said the internationalisation of the renminbi was now becoming a reality for China.
“The internationalisation of the renminbi is a clear stated strategy of China,” said Lam. “China is the world’s second largest economy and its largest exporter, so it has to start pricing some of its trades in its own currency rather than the euro, dollar or yen.”
She explained the push for reform started in July 2009 when the Chinese government launched a pilot programme allowing traders in a few cities, including Hong Kong, to settle trades in renminbi.
However, the market lacked the tools required to effectively trade in the currency and so take-up was slow. Lam said China soon realised for renminbi to be a competitive choice for traders, traders needed to be able to “build value in the currency they hold.”
In view of this the People’s Bank of China lifted a number of restrictions in July this year, effectively allowing anyone to open an account in renminbi for “any purpose”, said Lam. As a result, renminbi deposits in Hong Kong have jumped to $15bn, up 60% from the start of this year.
Lam said the major consequence of this is that asset managers will now be able to use renminbi to build new products, and will increasingly use Hong Kong as a platform to do so.
“The first fund has already been created to invest in debt instruments issued outside of China,” Ms Lam added. “The funds are small, but it is not about the size of the funds, but about underscoring that Hong Kong infrastructure is now ready and legally competent to offer renminbi products. The next major breakthrough should be the listed products area. It is all very exciting.”
