The central government is considering measures to further expand the renminbi (RMB) business in Hong Kong, local bankers and economists said.

The new business may include issuing yuan bonds on a trial basis and letting Hong Kong businesses use the currency to settle transactions involving imports from the mainland, Hong Kong Chief Executive Donald Tsang said yesterday.

He did not, however, give a timeframe for when the measures would be introduced.
"It will be a step forward, definitely," said Paul Tang, chief economist of the Bank of East Asia, Hong Kong's fifth-largest lender by market value.

"Traders would benefit by saving exchange costs. Hong Kong investors will also have a new investment tool  yuan-denominated bonds," he said.

The yuan business will be widened for Hong Kong banks from current account to capital account, said Andes Cheng, an analyst with South China Research Ltd, describing it as big progress.

More importantly, Terence Chong, a professor at the Chinese University of Hong Kong, said the move signals the further liberalization of the yuan, although the full convertibility of the currency will not be realized immediately.

At present, Hong Kong bankers are allowed to provide RMB deposits, withdrawal, exchange and remittance services, with some limits.

By March, the total RMB deposits in Hong Kong had reached 22.6 billion yuan (US$2.9 billion), and the cumulative value of spending and cash withdrawals using RMB debit and credit cards in Hong Kong amounted to HK$9.4 billion (US$1.21 billion), according to Hong Kong official data.

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