Hong Kong Monetary Authority: The total amount of the RMB Bond Connect scheme doubles to 200 billion yuan, with 40 participating banks now covering 11 countries.

The Hong Kong Monetary Authority, with the support of the People's Bank of China, increased the total amount of Renminbi business funds arrangement from 100 billion yuan to 200 billion yuan in February this year. As of now, the number of participating banks has expanded to 40, and the business has extended to 11 countries. The use of RBF funds has also shifted from trade financing to operational capital loans. Regarding the utilization of the quota, Eddie Yue, Assistant Chief Executive of the Monetary Authority, stated that the total quota of 200 billion yuan has not been fully utilized yet. The authority has reserved a portion of the quota to flexibly respond to outstanding performance of individual banks or a surge in demand from corporate clients. Vincent Lee, Deputy Chief Executive of the Monetary Authority, pointed out that in recent years, the proportion of international trade settlements in Renminbi in mainland China has significantly increased, with some months reaching about 30%. At the same time, the financing function of Renminbi has continued to strengthen, with dim sum bond issuances exceeding 1 trillion yuan for two consecutive years. As of the end of last year, the Renminbi loan balance in the Hong Kong banking system grew by 29% year on year to about 935 billion yuan. The reason behind this is that the Renminbi interest rate is lower than that of major currencies like the US dollar, coupled with market expectations for its appreciation. Lee further stated that with the expansion of Renminbi loan scale, the industry has recently reflected that the growth rate of Renminbi deposits in Hong Kong has not kept up with the growth rate of loans, leading to a loan-to-deposit ratio approaching 100%. According to data from the Monetary Authority, as of the end of May this year, the total amount of Renminbi deposits was 1.1347 trillion yuan, representing a 5% increase from the previous month. In order to alleviate this structural contradiction, the Monetary Authority introduced the Renminbi business funds arrangement last year, aiming to introduce onshore liquidity to support the lending capacity of Hong Kong banks. In February this year, the arrangement was further optimized, with the total quota increased to 200 billion yuan and the number of participating banks increased to 40, with business coverage extending to 11 countries and regions. Yue added that after the expansion of RBF quota, banks have shown a high level of enthusiasm for participation, with substantial quota applications from each bank. Currently, the use of RBF funds has expanded from trade financing to operational capital loan fields, with potential for further expansion in the future. In addition, the maximum term for fixed-rate loans, currently at 1 year, also has the potential for extension. He emphasized that he hopes that through RBF arrangement, the development of banks' Renminbi business will no longer be limited by local deposit base.