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SCMP Editorial
Editorial
SCMP Editorial

Hong Kong’s role in yuan internationalisation is expanding

The China treasury bond futures that were launched in the city are a critical hedging tool that will foster the renminbi’s global use

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Flags, including the Hong Kong Special Administrative Region and Chinese national flags, at Exchange Square in Central, Hong Kong, where the city’s stock exchange is located. Jelly Tse
SCMP Editorial
Editorials represent the views of the South China Morning Post on the issues of the day.
The launch of five-year China treasury bond futures in Hong Kong is a major milestone for the city as an international financial centre and for progress towards globalisation of the yuan. The presence of China Securities Regulatory Commission chairman Wu Qing at the launch ceremony at the Hong Kong stock exchange reflects that.

Wu said the latest opening of the mainland’s capital market to international investors also enhanced Hong Kong’s bridgehead role between China and the world. It is a concerted effort to boost not only Hong Kong but also the mainland.

In that regard, Wu encouraged dual listings between the two markets by calling on Hong Kong-listed companies to move across the border. He said mainland financial institutions had been using Hong Kong to go global, including some that did not have operations in Beijing. “We would like to see more dual listings with mainland firms to raise funds in Hong Kong, and encourage Hong Kong firms to list in the mainland,” Wu said. Mainland companies listed in the city could feel compelled to heed this call, which is part of efforts to strengthen mainland markets.

Liu Min, acting president of the Chinese Securities Association of Hong Kong, wrote in the SCMP that while the renminbi ranks fifth among global payment currencies, the offshore market still lacks a standardised instrument for hedging interest-rate risk. The new China treasury bond futures contract “closes that gap”, he wrote, adding that it “is not merely a product, but an institutional cornerstone for consolidating and elevating the renminbi’s status as an international reserve currency”.

As Liu said, sustained gold purchases by central banks in recent years could reflect unease with the existing reserve system. “Chinese government bonds – offering stable returns, low correlation with major global assets and the backing of a huge economy – are entering the calculations of currency reserve managers worldwide,” he noted.

A fully functioning bond market is an essential part of a modern and international monetary system. Moreover, the stability of the yuan has rested on capital controls and the lack of full convertibility with other freely traded currencies.

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