RMB Offshore Market Should Walk On Two Legs.

The president of the Hongkong Monetary Authority announced in November 12th that since November 17th, Hongkong residents will be no longer subject to the restriction of 20 thousand yuan per person per day, and the exchange between Hong Kong dollar and Renminbi will be exchanged indefinitely. November 17th happened to be the start date of Shanghai and Hong Kong through. The cancellation of the quota for Hongkong residents to exchange Renminbi can provide convenience for Hongkong residents to buy A shares through Shanghai stock.

The quota for the Hongkong residents to convert RMB into Renminbi began in 2004. That year, the people's Bank of China began to provide a clearing arrangement for the Bank of Hongkong within a specified scope, initially designated as the four business of personal RMB deposit, exchange, bank card and remittance. At that time, the Hongkong bank clearing bank authorized by the people's Bank of China (BOC Hongkong) could provide a flat service for Hongkong residents' "cash exchange with a value of not more than 6000 yuan per person per time". The quota was raised to 20 thousand yuan later.

Before that, Hongkong residents had no quota restrictions on changing renminbi, and in changing stores and banks, customers could change as much as they wanted. At that time, the main source of Hongkong's currency came from passengers, and then circulated in the Hongkong market. This is the external circulation of the renminbi. The central bank can not control it or give it support. After 2004, the central bank acted in Hongkong to provide liquidation arrangements to support the development and expansion of Hongkong's offshore RMB market. If there is support, there must be intervention. Banks accepting the clearing bank's flat services must be restricted when they exchange Renminbi for Hongkong residents. It is still possible to exchange Hong Kong dollars and Renminbi for customers without changing the demand for clearing bank services and some banks.

The central bank provides liquidation arrangements so that Hongkong's RMB will no longer circulate outside the border, but will be able to cross border use. The RMB can go out and get back through the clearing bank. In July 2010, the people's Bank of China and the Hongkong monetary authority and Hongkong Bank of China revised the Hongkong RMB business clearing agreement. After facilitating the cross-border use of RMB, they also supported the offshore circulation of RMB (the new liquidation arrangement promoted the development of Hongkong's RMB denominated financial products).

Through these steps, the RMB in Hongkong can be circulated overseas and cross border, which greatly promotes the development of offshore RMB market in Hongkong. One strong evidence is the growth of Renminbi deposits in Hongkong. In June 2010, the balance of RMB deposits in Hongkong was 89 billion 700 million yuan, up to 553 billion 600 million yuan in June 2011, an increase of 5 times compared with the same period last year. By September 2014, RMB deposits in Hongkong had reached nearly trillion yuan, which was 944 billion 500 million yuan.

Off shore of Hongkong RMB The development of the market shows that the offshore RMB market needs to walk on two legs by cross-border circulation and cross border use. Without liquidation arrangements and cross border use, the renminbi will not flow out of the legal channels, and the non residents will not dare to hold it. But China still has some control over capital account, so we need to specify the scope of the liquidation arrangement and set the quota. Otherwise, a large amount of funds will pass through this. channel Outflow, which makes capital item control ineffective, limits cross-border use. Therefore, the growth of offshore market depends on overseas circulation. Cross border use provides support for offshore circulation, while overseas circulation amplifies cross border use.

　　 Central Bank In the year, the quota for individual RMB exchange for Hongkong residents was set up to expand the cross border use of RMB, and the quota was increased from 6000 yuan to 20 thousand yuan, which expanded the channel. Now, the central bank has agreed to lift the quota, which is certainly not to expand the channel indefinitely - that will interfere with current capital account control. The central bank actually agreed to cancel the exchange quotas because clearing houses would no longer provide full flat services for exchange, and most of the exchange would be self balanced by banks in Hongkong. This is to promote the external circulation of RMB. In fact, at present, the RMB pool in Hongkong has a certain scale. There should be no big problem in the offshore market and the RMB exchange business without quota.