International businesses are increasingly seeking to diversify away from the US dollar, with Qatar emerging as a notable example of this trend, according to Mary Huen Wai-yi, chairwoman of the Hong Kong Association of Banks. During a recent government-led visit, Huen highlighted that Qatari companies are eager to utilize Hong Kong’s extensive yuan (RMB) “toolbox,” including settlement, payment, hedging, and swap services, to support joint ventures and investments involving China.
The surge in yuan-denominated trade and investments benefits Hong Kong’s financial sector, particularly as China and Qatar deepen economic ties amid Qatar’s transition towards new energy and technology sectors. This shift reflects broader geopolitical dynamics, where US trade tensions have driven countries and corporations to explore alternatives to the dominant dollar, accelerating China’s long-term strategy to internationalize the yuan.
Hong Kong’s strategic position as an offshore yuan hub is central to this process. While mainland China maintains capital controls, Hong Kong’s open currency market and cross-border Connect schemes for stocks, bonds, swaps, and wealth management provide controlled channels for yuan capital flows. These mechanisms enable Hong Kong to act as an “interchange” for diverse currencies flowing into yuan-denominated investments.
Data from the People’s Bank of China showed that cross-border yuan settlements reached a record 1.51 trillion yuan (US$209 billion) in April, reflecting a 12 percent increase from the previous month. Although the US dollar remains dominant, accounting for 82.1 percent of global trade finance, the yuan has gained ground, occasionally surpassing the euro.
Recent credit rating downgrades and rising US debt have raised concerns about the dollar’s long-term primacy, presenting opportunities for Hong Kong and mainland China to attract investment inflows. Experts note that the Hong Kong Monetary Authority’s efforts to enhance offshore yuan liquidity and promote yuan-denominated products, such as dim sum bonds and structured notes, further support this growth.
Technological innovation, including Hong Kong’s participation in the cross-border central bank digital currency project mBridge, promises to streamline yuan transactions and bolster international usage. As businesses worldwide, including central banks in Europe and Africa, show increased interest in yuan reserves, Hong Kong is well-positioned to facilitate this shift, capitalizing on its advanced financial infrastructure and expanding yuan product offerings.
With geopolitical tensions and currency volatility driving demand for alternatives, the yuan’s rise is reshaping global finance, offering Hong Kong a pivotal role in the evolving landscape of international trade and investment.
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