* HKMA sees sharp rise in yuan for trade settlement in
* HK banks handled 83 pct of total yuan for trade settlement
* Yuan for China direct investment may rise to 50 pct in
5-10 years - HKMA
(Adds details, quotes)
HONG KONG, Feb 18 The Hong Kong Monetary
Authority (HKMA) said on Tuesday it expects China's yuan used
for trade settlement to rise to 30 to 60 percent of the
country's total in the medium term.
The authority said that would represent a two- to four-fold
jump from the current level.
"As China continues its reform and further liberalisation of
capital account and renminbi convertibility, there does not seem
to be any particular reason that renminbi in the mainland's
bilateral trade cannot reach that of the yen or the euro in five
to 10 years," said Norman Chan, Chief Executive of the city's de
facto central bank.
Some 50-60 percent of the euro zone's external trade is
settled in euro, and the corresponding estimate for the yen is
30-40 percent, Chan said.
Trade settlement in yuan accounted for 18 percent of China's
total trade in 2013, compared with just 2 percent in 2010, a
year after the yuan trade settlement pilot scheme kicked off,
statistics from the People's Bank of China showed.
Among yuan trade settlement, transactions handled by banks
in Hong Kong stood at 3,841 billion yuan ($633.40 billion) last
year, comprising 83 percent of the total.
The use of yuan in China's inward direct investments has
risen from 5 percent in 2011 to about 20 percent and this could
rise to 50 percent in five to 10 years, the HKMA added.
The world's second-largest economy has stepped up efforts to
promote its currency to foreign investors, aiming to lift the
global status of the "redback" to that of the U.S. dollar.
The yuan has become one of the world's 10 most-used
currencies for payments, overtaking the Singapore dollar and
Hong Kong dollar, according to global transaction services
As the Chinese currency gradually expands its footprint
beyond Hong Kong, competition among potential offshore yuan
centres, including Taiwan, Singapore and London, has also
Taiwan, which only entered the offshore yuan race a year
ago, has seen rapid expansion of its yuan pool. Yuan deposits in
the island amounted to 214.5 billion yuan by the end of January,
up 17.5 percent from a month earlier.
While Hong Kong accounts for 70 percent of offshore renminbi
deposits and payment transactions globally, the city will not
hold such a big share forever, Chan said.
"It is unrealistic for one to expect a long-standing
monopoly by Hong Kong on the world's offshore renminbi
business...After all, the opening up and facilitation of
cross-border use of the renminbi is to serve the country's needs
for pursuing financial reforms and economic growth," Chan said.
The HKMA said the renminbi real time gross settlement system
saw an average daily turnover of 395.4 billion yuan in 2013,
while in 2010, it was only 5.3 billion yuan.
Average daily turnover of offshore yuan foreign exchange
also climbed to 20 billion yuan last year.
HSBC expected the yuan to become fully convertible within
five years and the currency was on track to become the third
largest trade settlement currency by 2015.
($1 = 6.0641 Chinese yuan)
(Reporting By Michelle Chen and Clement Tan; Editing by