The Chinese Offshore Renminbi Currency and Bond Markets: The Role of Hong Kong

China and World Economy, Vol. 20, No. 3, 2012, 107-122

23 Pages Posted: 5 Apr 2012 Last revised: 12 Jun 2012

See all articles by Hung-Gay Fung

Hung-Gay Fung

University of Missouri at Saint Louis - College of Business Administration

Jot Yau

Seattle University

Date Written: December 1, 2011

Abstract

This paper discusses the role of Hong Kong in China's grand scheme to build up the RMB as a global reserve currency. We highlight the economic importance of Hong Kong to China in terms of channeling foreign direct investment into China, some of which, in the future, will be denominated in the RMB. We discuss the development of China's RMB currency swap and deposit markets in Hong Kong. These offshore markets enable the RMB to trade freely, setting the stage for the RMB to become fully convertible and allowing market forces to play a role in pricing the value of the RMB, and help in the development of the RMB-denominated bond (or dim sum bond) market in Hong Kong. Finally, we present evidence of the phenomenal growth of the dim sum bond market in Hong Kong, which can further enhance and strengthen the use of the RMB outside China.

Keywords: dim sum bonds, FDI, offshore market, reserve currency, RMB

JEL Classification: F15, F31, G28

Suggested Citation

Fung, Hung-Gay and Yau, Jot, The Chinese Offshore Renminbi Currency and Bond Markets: The Role of Hong Kong (December 1, 2011). China and World Economy, Vol. 20, No. 3, 2012, 107-122, Available at SSRN: https://ssrn.com/abstract=2034610

Hung-Gay Fung

University of Missouri at Saint Louis - College of Business Administration ( email )

One University Blvd.
487 SSB
St. Louis, MO 63121
United States
314-516-6374 (Phone)

Jot Yau (Contact Author)

Seattle University ( email )

901 12th Avenue
Seattle, WA 98122
United States

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