China to allow large use of currency in HK

Shanghai, November 1:

China’s central bank will allow expanded yuan-denominated business in Hong Kong in a move expected to promote economic integration of the former British colony with the Chinese mainland.

The People’s Bank of China said Tuesday that the change in policy would come after technical preparations are completed. The change will enable Hong Kong residents to exchange the equivalent of 20,400 yuan (US$2,500; euro2,000) per transaction, up from the previous limit of 6,000 yuan (US$740; euro620) per transaction, the central bank said in a statement on its Web site.

The move is intended to facilitate spending by Hong Kong and mainland residents, boost the circulation of the yuan, also known as the renminbi, or “people’s money,” and improve Hong Kong’s status as a financial center, the central bank said. The plan to expand use of the yuan in Hong Kong was broadly outlined in an Oct. 12 policy address by Hong Kong’s top leader, Chief Executive Donald Tsang.

Such moves “must be developed steadily in a sequenced manner” to match policy changes in the mainland, the central bank said. China is gradually loosening its own currency controls. Other changes planned include raising limit on yuen-denominated remittances to mainland Chinese bank accounts from Hong Kong to 80,000 yuan (US$10,000; euro8,300) from the current 50,000 yuan (US$6,000; euro5,000).

A 100,000 yuan (US$12,000; euro10,000) limit on yuan-denominated bank cards issued by Hong Kong banks will be eliminated, with lenders allowed to set their own restrictions, it said.

Hong Kong residents will be allowed to write yuan-denominated checks worth up to 80,000 yuan (US$10,000; euro8,300) for consumer purchases in the neighboring mainland province of Guangdong, the central bank said.

There are 38 banks in Hong Kong offering personal yuan business to their clients, according to the central bank. Hong Kong, a former colony of Britain, returned to Chinese control in 1997 but retains a largely autonomous economic and political system.