The People's Bank of China (PBC) announced on 17 August 2010 a pilot scheme to permit Hong Kong and Macau insurers, banks and certain other financial institutions, with the approval of the PBC, to invest in the Chinese mainland's 48.8 trillion renminbi (US$7.2 trillion) interbank bond market. Each institution will receive a quota for Chinese mainland interbank bonds according to its individual situation. The move has been welcomed by the Hong Kong Monetary Authority (HKMA).
The announcement by the PBC liberalises the use of Chinese currency, allowing eligible institutions outside the mainland (including global central banks and the Hong Kong Exchange Fund) to make use of their renminbi holdings to diversify into Chinese mainland assets. The pilot scheme will reduce insurers', banks' and certain other financial institutions' reliance on the US bond market.
The Chief Executive of the HKMA, Mr Norman Chan, has said that this will further promote the development of renminbi trade settlement in Hong Kong, and enhance the attractiveness of renminbi business in Hong Kong. As such, the move is expected to consolidate Hong Kong's position as a renminbi offshore centre. The HKMA has said it will liaise closely with the PBC on the implementation of the pilot scheme.