Yuan trade eclipses Hong Kong dollars for first time

HONG KONG, June 17 Mon Jun 17, 2013 1:53am EDT

HONG KONG, June 17 (Reuters) - Daily average trading volume of yuan in Hong Kong jumped to a record in May, exceeding the volumes of Hong Kong dollars for the first time ever, indicating the yuan's growing importance in international trade.

Average daily yuan trading volume rose to a record 390 billion yuan ($63.61 billion) last month in Hong Kong, according to data from the Hong Kong Monetary Authority and comments made by HKMA chief Norman Chan to reporters during a yuan roadshow in New York.

Chan said he expected turnover to rise further.

In comparison, the average volume of Hong Kong dollars traded daily was 487 billion Hong Kong dollars ($62.74 billion).

The growth of the offshore yuan market in Hong Kong has gone from strength to strength since it was launched in mid-2010, with deposits growing from less than 1 percent of total deposits in the Hong Kong banking system to around 10 percent now.

Chart of CNH deposits in HK:

That impressive growth has led to the rise of a thriving offshore yuan bond market in Hong Kong and rising trade settlement volumes, with more than 12 percent of China's global trade now denominated in the yuan compared to less than 1 percent in 2010.

While the market's momentum slowed in the second half of 2012 due to weak global sentiment and a Chinese leadership transition, recent months have seen a renewed determination from Beijing to widen the yuan's footprint in global trade.

New offshore yuan centres have been opened in Taiwan and Singapore, regulators have relaxed restrictions on investments via yuan and foreign currency quotas and more channels for moving yuan funds across borders have been opened.

But even as more cities have shown a desire to become offshore yuan centres, the evidence indicates that Hong Kong remains the overwhelming leader in spearheading China's yuan internationalization initiative.

For instance, a recent City of London report said that yuan deposits in banks and private wealth accounts in London declined in 2012 compared to net growth in Hong Kong in that period.

In Hong Kong, about 174 participants had signed on to the yuan real time gross settlement system (RTGS), a system responsible for clearing all interbank payments, by the end of 2012, according to HKMA data.

Weekly CNH Tracker:

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