The further expansion and liberalisation of the Renminbi trade
settlement pilot scheme, together with the recent signing of the
revised Settlement Agreement on the Clearing of Renminbi Business
in Hong Kong are seen by most foreign investors as an important and
very positive step in China's internationalisation of its
currency. In particular, it is expected that these developments
will result in a significant increase of Renminbi reserves in Hong
Kong. This will stimulate the development of new
Renminbi-denominated investment options which will help Hong Kong
establish its position as an active Renminbi offshore centre.
However, the key issue which will affect the motivation of
foreign investors to accept the Renminbi as a clearing currency and
to invest in RMB products is whether and when such foreign-held
Renminbi will be allowed to be used freely in the capital markets
of China, given the Renminbi is not an internationally convertible
currency. Foreign investors
