H. Kong unveils new yuan trade finance scheme

Hong Kong plans to introduce a new yuan trade finance scheme and expand its Bond Connect programme for Chinese investors, said Eddie Yue, Chief Executive of the Hong Kong Monetary Authority (HKMA), on Monday.

China’s central bank governor made several announcements at a business conference, including plans to assist Hong Kong with affordable yuan funding and initiatives to bolster the yuan, which has dropped to its lowest level in 16 months.

Beijing will back Hong Kong in launching a trade finance scheme with 100 billion yuan ($13.64 billion) in currency swaps for different durations, as stated by Yue, Hong Kong’s central bank chief, at the Asia Financial Forum in Hong Kong.

The two central banks have a currency swap agreement worth 800 billion yuan.

Banks in Hong Kong can now exchange their Hong Kong dollars for yuan funding with the HKMA at interest rates tied to onshore rates, giving them a stable and cost-effective source of yuan funds, according to Yue.

Yue announced that the deadline for the Bond Connect scheme settlement will be extended to 4:30 p.m. (08:30 GMT) and will now include US dollar and euro-denominated bonds in addition to yuan bonds.

The HKMA will also encourage yuan repurchase agreements, enabling international investors to utilise onshore bonds as collateral for yuan funds in Hong Kong, starting from Feb. 10, he mentioned.

Attribution: Reuters

Subediting: Y.Yasser