Large corporate issuers won't raise money in Hong Kong's renminbi market unless the pool of the Chinese currency there is expanded considerably, according to a senior investment banker who is a member of the consultative body to China's parliament.
Facilitating transfer of the renminbi, China's currency, to and from Hong Kong is also essential to encourage corporate investors to raise money there, said Fang Fang, J. P Morgan's CEO for China investment banking.
"We need to find ways to increase the pool of RMB in Hong Kong," said Fang, who put the figure at slightly more than 300 billion yuan. "I don't think that's enough to make it a real, functional offshore market."
Fang hopes to attract such corporate issuers as McDonalds, General Electric and others to Hong Kong's renminbi market. Fang is a member of the Chinese People's Political Consultative Conference, an advisory body to the National People's Congress, China's parliament. Both bodies have just opened their annual meetings in Beijing.
The Chinese government is promoting the internationalisation of the renminbi, also called the yuan, hoping that it will rank alongside the dollar as an international reserve currency.
Beijing is also pushing Hong Kong as an offshore trading hub for the yuan. Fang said he is seeking ways to ensure the yuan crosses Hong Kong's border smoothly in both directions. "If I'm a Beijing citizen and send 200,000 RMB to invest in Hong Kong, I need to find a way, if I want, to get the money back," he said. "Unless I feel comfortable doing so, I will not be remitting enough necessary funds to make a real investment out there." Fang also said he wants to see more renminbi products in Hong Kong, including real estate, insurance, reinsurance and other instruments. Fang has been spending time at the consultative conference meeting with officials from China's central bank, the National Reform and Development Commission and the Chinese Banking Regulatory Commission to garner support for his plan. Those agencies will then consult among themselves, he said.
"This is how the CPPCC works," he said. "More often than not they will say it's a good idea but here are the issues we will continue to work on."