Chinese yuan deposits in Hong Kong exceed 1 trillion, cementing city’s offshore hub role
Improvement in equity-market sentiment and companies’ increasing need for yuan are driving the increase in deposits, according to analysts
Deposits of Chinese yuan in Hong Kong reached 1.06 trillion yuan (US$149.5 billion) in July, further cementing the city’s role as the largest offshore yuan hub as tailwinds gather for the currency’s internationalisation.
Yuan deposits in July exceeded 1 trillion yuan for the fourth month despite declining by 0.4 per cent, according to the Hong Kong Monetary Authority’s data published on Friday.
The total yuan remittance for cross-border trade settlement reached 1.28 trillion yuan, 1.6 per cent higher than in June.
Improvement in equity-market sentiment and companies’ increasing need for yuan for trade settlement and working capital have contributed to the jump in yuan deposits in Hong Kong, according to analysts.
The Hang Seng Index rose 7 per cent in the second quarter, recovering from a 14-per cent slump in 2023 and a 3-per cent decline in the first three months of the year. Trade volume by mainland Chinese investors buying and selling shares in Hong Kong via the southbound channel of the Stock Connect mechanism also jumped in April and May, averaging 35 billion yuan and 52 billion yuan, respectively, compared with 28 billion yuan in the first quarter.
“All these are indications that investors, in particular mainland investors, who were previously sitting on the sidelines because of weak market sentiment at one stage, did return, and they were bringing their liquidity to Hong Kong,” said Kelvin Lau, Greater China senior economist at Standard Chartered Bank (HK).
