Hong Kong unveils gold, bond and liquidity plans to drive next phase of yuan adoption

Hong Kong Exchanges and Clearing (HKEX) announced plans to launch yuan-denominated gold futures early next year, as part of Hong Kong's efforts to drive the next phase of yuan adoption. This move is aligned with two priorities outlined in the city's first five-year plan: promoting yuan internationalization and developing Hong Kong's gold market. Chief Executive John Lee Ka-chiu recently indicated that the Exchange Fund would increase investment in local gold products.

Hong Kong Monetary Authority (HKMA) CEO Eddie Yue Wai-man revealed that the de facto central bank would explore a seven-day offshore yuan liquidity mechanism to address banks' short-term funding needs. Additionally, HKMA would introduce measures to support tokenization in the local bond market, including for yuan-denominated bonds. Yue emphasized that diversification and digitalization would drive the next stage of yuan internationalization and bond-market development in Hong Kong.

Yue stated that Hong Kong's role as a digital finance leader would see the fostering of innovative solutions and infrastructure for digital yuan bonds, with the aim of positioning the city as the leading hub for global tokenized bond issuers. Darryl Ho, executive director of HKMA, highlighted that the internationalization of the yuan has reached its last mile, referring to the need for banks and corporations to use the yuan in the real economy.

He noted that Chinese corporations were making direct yuan investments in overseas markets, further supporting yuan internationalization. As of December, Hong Kong was the world's largest offshore yuan market, handling 74.6% of offshore yuan payments, followed by Britain with 7%.