HK to raise yuan quota for cross-border trade

The Hong Kong Monetary Authority (HKMA) has tapped its yuan swap arrangement and will raise its yuan quota for cross-border trade settlement to about 20 billion yuan to satisfy the increasing demand, the 21st Century Business Herald reported Thursday, citing several traders.

No official confirmation is yet available from the People's Bank of China (PBOC) or HKMA, the newspaper said.

As early as January 2009, the PBOC and the HKMA signed a three-year yuan swap arrangement deal involving a swap line of 200 billion yuan (HK$227 billion). The money could be used to maintain financial stability, such as providing short-term cash flow and yuan trade settlement.

This is the first time that HKMA switched on the deal since the signing, the newspaper said, citing industry insiders.

The activation of the swap facility is triggered by the soaring demand for currency, including the need for investment as well as for speculation, the report said.

In the first nine months, yuan cross-boarder trade settlement used up only 4 billion yuan. However, because of expectations of a renminbi appreciation, yuan settlement increased rapidly in October, using up half of the annual quota, the report said.

HKMA announced on Oct 30 that the official yuan clearing bank for trade settlement, Bank of China (Hong Kong), has used up its initial 8 billion yuan quota.
 

Source: China Daily