Hong Kong’s yuan pool is growing. Can it turn liquidity into global demand?

Hong Kong's financial authorities are urging local banks to utilize the city's expanding pool of offshore yuan liquidity, while also preparing for the increasing use of autonomous AI systems in finance. At a Hong Kong Association of Banks luncheon, Eddie Yue Wai-man, chief executive of the Hong Kong Monetary Authority, called for lenders to leverage their global networks to expand the Chinese currency's reach.

The regulatory body is prepared to remove the funding cap on Hong Kong's yuan liquidity facility if demand continues to grow, with the current quota increasing from 200 billion yuan to 500 billion yuan. The facility currently provides commercial banks with yuan funding that can be lent to customers. Regulators urge banks to report operational issues and client difficulties to refine the system.

While yuan-denominated trade transactions have increased to 30% of China's total trade settlement, Hong Kong's Securities and Futures Commission warns that the broader international use of the yuan could stall unless financial institutions develop a more extensive range of yield-bearing and risk-hedging products. The SFC is considering extending its dual-counter stock trading model to Southbound Stock Connect flows, allowing mainland investors to buy and settle Hong Kong-listed shares directly in yuan.

The panel also discussed how AI and other financial technologies are reshaping the sector, with the Hong Kong Monetary Authority co-developing an AI explainability toolkit with top global regulators.