Eddie Yue, chief executive of the Hong Kong Monetary Authority, said Monday that Hong Kong will launch a new yuan-denominated trade finance program and expand the hours and scope of its Bond Connect program for mainland Chinese investors .
The announcement adds to others made by China’s central bank governor Pan Gongsheng at a business conference, including pledging to help Hong Kong provide cheap yuan financing to the territory and measures to support the yuan, which has fallen to its lowest level in 16 months.
Beijing will support Hong Kong in launching the trade finance program using 100 billion yuan ($13.64 billion) in currency swaps for one, three and six months, central bank chief Yue said of Hong Kong, on the sidelines of the Asian Financial Forum in Hong Kong.
The two central banks reached a currency swap agreement totaling 800 billion yuan.
Under this new mechanism, banks can exchange their Hong Kong dollars for yuan funds with the HKMA at interest rates linked to onshore rates, providing Hong Kong banks with a stable source of funds in relatively less expensive yuan, Mr. Yue said.
-Yue said the settlement deadline for the Bond Connect system will be extended to 4:30 p.m. (0830 GMT) and expanded to include bonds denominated in U.S. dollars and euros, in addition to yuan bonds.
The HKMA will also encourage yuan repurchase agreements, allowing international investors to use onshore bonds as collateral for yuan funds in Hong Kong, starting Feb. 10, it said.
($1 = 7.3316 Chinese yuan renminbi)
