| HONG KONG, July 3
HONG KONG, July 3 Hong Kong's offshore yuan
business is an "ever-growing slice of cake", but if it doesn't
want to eat it, that's its own problem, a People's Bank of China
official said, when asked about a protest movement calling for
democracy in the territory and threatening to disrupt its
A pro-democracy march on Tuesday, which organisers said
attracted more than 510,000 people, and a subsequent sit-in by
mainly student groups could turn out to be the biggest challenge
yet to China, which resumed control over the former British
colony on July 1, 1997.
Hong Kong has wide-ranging autonomy under an agreed formula
of "one country, two systems", allowing protests such as
Tuesday's march to take place, but China bristles at open
dissent, especially over sensitive matters such as demands for
The city accounts for 53 percent of global offshore yuan
business, but if Hong Kong "does not want to eat it", it's the
city's own business, said Guo Jianwei, deputy director-general
at the monetary policy department of China's central bank.
He added that his comments to finance journal Caixin and
other media in Beijing were in response to a question about the
impact of Occupy Central, a group that organised an unofficial
referendum on democracy in Hong Kong. Guo confirmed his comments
to Reuters on Thursday.
The movement has threatened to lock down the Central
business district of Hong Kong, home to some of Asia's biggest
companies and banks, as part of its campaign to demand greater
democracy in elections for the city's leader in 2017.
"We should not read too much into what he said. There might
be some market volatility produced by the remarks, but no big
impact on sentiment," said Ma Xiaoping, China economist, global
research at HSBC.
Other market watchers said Hong Kong's role as the dominant
offshore yuan centre cannot be replaced as China must rely on it
to test pilot programmes to open up the domestic market to
"Hong Kong remains the first choice when China tests more
relaxation of cross-border fund flows under the capital account
given risk is controllable here," said Ngan Kim Man, head of RMB
business strategy and planning at Hang Seng Bank.
China will balance risks and rewards when it reforms its
financial market, and Hong Kong is a good springboard for China
to expand its pilot schemes worldwide, Ngan added.
Authorities in China and pro-Beijing newspapers have
criticised the Occupy Central campaign, saying it will damage
Hong Kong and could hurt its standing as a financial centre.
On Wednesday, hundreds of Hong Kong police forcibly removed
kicking and screaming protesters from the Central business
district, holdouts of a mass rally demanding greater democracy
from Communist Party rulers in Beijing.
Beijing has recently accelerated the pace to expand its
currency's footprint beyond Hong Kong and Asia by setting up new
yuan clearing banks in Europe.
The offshore yuan market is an open and competitive market
which is not uniquely owned by Hong Kong, China's deputy finance
minister Wang Bao'an told media in Beijing at the same briefing
on Tuesday where Guo spoke.
Hong Kong can't rely only on the central government to
enhance and develop its position in yuan business, instead, the
key lies in the Hong Kong government, Wang said.
The city handles about 80 percent of China's cross-border
trade settled in yuan and has the world's largest offshore yuan
deposits of almost 1 trillion yuan ($160.9 billion).
($1 = 6.2145 Chinese yuan)
(Additional reporting by Pete Sweeney and Shanghai Newsroom;
Editing by Anne Marie Roantree and Jacqueline Wong)