HK welcomes permission to RMB-denominated FDI

The Hong Kong Special Administrative Region (HKSAR) government welcomes the promulgation of regulations about foreign direct investment (FDI) settled in the Chinese currency Renminbi (RMB) by the People's Bank of China and the Ministry of Commerce on Friday. To widen the channel for Renminbi to flow back to China, Chinese Ministry of Commerce promulgated the "Notice on Cross- border Renminbi Foreign Direct Investment" and the People's Bank of China promulgated the "Renminbi Foreign Direct Investment Settlement Rules," permitting overseas investors to invest directly in China with Renminbi they have obtained legally overseas. "The Hong Kong Special Administrative Region government welcomes the promulgation by the Ministry of Commerce and the People's Bank of China," said John Tsang, the Financial Secretary of the HKSAR government. "It provides transparency and certainty for the related procedures in making foreign direct investments in Renminbi." Tsang said the relevant rules will lower the risk of currency exchange for Hong Kong enterprises in making investments in the Mainland as well as significantly increase the demand of Hong Kong and international enterprises for RMB financing. He added that enterprises can make use of the RMB fund-raising platform in Hong Kong by financing direct investments in the Mainland through banks, debt and equity. Thus the implementation of the measure not only supports the development of the Mainland's real economy, but also provides more investment channels for the growing pool of RMB funds in Hong Kong. He expected that this would further promote the development of the RMB bond and securities markets, hence expediting the development of the offshore RMB business of Hong Kong. In the past year or so, the development of Hong Kong as the offshore Renminbi business center has been deepened and advanced, playing a very important role in the increasing use of Renminbi in cross-border trade and investments and the currency's internationalization, and at the same time supporting the development of offshore Renminbi businesses in different places around the world. Chief Executive of Hong Kong Monetary Authority Norman Chan said, "The offshore and onshore Renminbi markets are linked by three bridges, namely, cross-border trade, direct investments and portfolio investments. This is an important step in further expanding the bridge for the use of Renminbi for direct investments." He added, "The promulgation of the administrative rules regarding foreign direct investments in Renminbi will greatly expand the use of Renminbi funds in Hong Kong and promote the development of the Renminbi bond market and financing activities in Hong Kong, enabling the development of the Hong Kong offshore Renminbi business center to reach a new level."