Offshore renminbi deposits and trade settlements have surged in recent months, raising speculation that China is accelerating moves to loosen its ties to the US dollar and create a new global reserve currency.
Total Chinese currency deposits in Hong Kong were Rmb510 billion ($79 billion) at the end of April, five times the level in mid-2010, according to figures from the Hong Kong Monetary Authority, while cross-border trade settlement totalled Rmb134 billion, 13 times the figure posted last July, and nearly 60% of the monthly total trade settlement.
The figures highlight China’s enthusiasm for turning the renminbi into a bona fide international unit of exchange, says Thomas Poon, head of business planning and strategy at HSBC in Hong Kong.
"We are witnessing the birth of a major international currency, and it’s exciting," Poon says in an interview with EuromoneyFXnews. "This is China’s plan to get away from the US dollar cash trap, and monetary authority figures show that the move is accelerating."
Driving the increase in deposits was a big rise in corporate activity, which accounted for two-thirds of total deposits, compared with one-third late last year. Individual deposits accounted for the remainder, as Hong Kong residents piled in sums up to the daily limit of Rmb20,000.