Hong Kong targets gold trading, FPS-UnionPay link to boost yuan use

Hong Kong plans to expand the use of the yuan in areas such as gold trading and cross-border payments, as part of efforts to internationalize the Chinese currency. Chief Executive John Lee Ka-chiu highlighted this during the city’s first five-year plan and annual policy address, emphasizing the goal of strengthening Hong Kong’s position as a global financial center.

The Hong Kong Monetary Authority (HKMA) is set to introduce a tendering mechanism for seven-day offshore yuan liquidity and explore issuing short-term debt instruments. This move aims to facilitate wider use of the currency and allow banks to manage liquidity more effectively as demand for the yuan grows. Furthermore, the HKMA plans to link Hong Kong’s Faster Payment System with mainland China’s bank card and payment system UnionPay by year-end, enabling seamless payments in both Hong Kong dollars and renminbi.

To bolster Hong Kong’s role in cross-border payments, the HKMA is also expected to encourage more foreign banks to join the Cross-Border Interbank Payment System (CIPS). This alternative clearing network for yuan transactions would provide banks with additional channels to settle transactions, complementing the Society for Worldwide Interbank Financial Telecommunication (SWIFT) system.

In line with the commitment to promote the use of renminbi in government expenditure, the government plans to utilize the currency more extensively in the future, particularly in paying mainland suppliers. The city’s stock exchange will unveil new renminbi-denominated, physically settled gold futures contracts this year, further enhancing the yuan’s global influence in precious metal pricing.

Additionally, Hong Kong aims to develop a regional intellectual property trading center. The Intellectual Property Department will bolster its capacity for original grant patent applications in key technology sectors, with the government allocating resources for 40 additional staff members. Pilot facilitation measures are being studied to implement these initiatives next year, while authorities will assess the potential relaxation of the listing mechanism further.