Opening up Mainland China’s economy through Renminbi internationalisation is a key point of the 14^th Five-Year Plan, in which Hong Kong has a critical role to play, and it took a significant step forward this week.

Hong Kong Exchanges and Clearing Limited (HKEX) launched the Hong Kong Dollar (HKD)-Renminbi (RMB) Dual Counter Model and the Dual Counter Market Making Programme in its securities market.

The model applies to 24 Hong Kong-listed companies which account for 40% of average daily turnover of the cash equities market, the HKEX, which runs the Hong Kong Stock Exchange, said. The listings now trade and transact as Dual Counter securities, offering both HKD and RMB counters. In addition, nine exchange participants have joined the Dual Counter Market Making programme as market makers.

Market mover

HKEX Chief Executive Officer Mr Nicolas Aguzin (main picture, fifth right) said: “The ongoing internationalisation of the RMB will be one of the defining characteristics of global markets in the next decade, and at HKEX we are delighted to today be taking another step forward in building a liquid and accessible RMB ecosystem. The launch of the Dual Counter initiative is the latest in our broad suite of RMB products, providing investors with more choice and companies with another channel to tap the Hong Kong offshore RMB pool.”

Mr Aguzin added: “Today’s launch is the culmination of many months of hard work and we’d like to thank all our market participants, our regulators and those involved whose partnership and collaboration have helped to continue to reinforce Hong Kong’s role as the preeminent global offshore RMB hub.”

Hong Kong Financial Secretary Mr Paul Chan (main picture, right of gong) and HKEX Chairman Ms Laura M Cha (main picture, left of gong) struck the gong to celebrate the launch of the Dual Counter Model at a market open ceremony today, attended by legislators, regulators, issuers and market participants at HKEX Connect Hall.

Market timing

Mr Chan said the model was launched right at a time when the strategic importance of renminbi – in terms of fund flow, liquidity and popularity – was rising.

In 2021, cross-border renminbi use reached more than Rmb36 trillion (US$5 trillion), representing an increase of nearly 30% year on year, Mr Chan said. “As at the first quarter this year, the proportion of RMB in cross-border payments and receipts in the mainland has risen to 48%, surpassing the US dollar for the first time. In addition, using RMB as a settlement currency for international trade and investment has become increasingly prevalent.

“Of course, viewing it holistically, there is still ample room for the global use of RMB to grow. While our country is the world’s second-largest economy, accounting for more than 18% of the world's GDP, and is the largest trading economy contributing to about 13.5% of global trade, the use of RMB in SWIFT, ie cross-border trade settlement, and as a worldwide reserve currency, constitutes less than 3% respectively.”

He said it was clear that RMB internationalisation would only accelerate in future, particularly under this rapidly changing global geo-political and environment – which was unseen in a century. Seeking diversification for greater security is on everyone's agenda.

“As countries trade and invest in RMB and use it as a reserve currency, the demand for various investment and risk management products is bound to rise.

“Hong Kong will play a pivotal role in this great process of change, and we are keen to grasp the opportunities ahead. We have long been the offshore RMB hub, no matter in terms of liquidity, trade settlement or product variety,” Mr Chan said.

Two currencies

HKEX said that under the model, designated shares listed in both HKD and RMB counters can be traded and settled in RMB or HKD. Dual Counter Market Makers for eligible shares offer continuous buy and sell quotes for securities in the RMB counter, providing liquidity for HKD-RMB Dual Counter securities trading and minimising any possible price discrepancies between the two counters.

The model provides the groundwork to support the next phase of development to allow investors from the mainland to trade Hong Kong-listed RMB securities through Southbound Stock Connect.

The model covers securities listed in both HKD and RMB counters only. All shares or units of the same securities but in different trading counters are generally of the same class, with the same holders’ rights and entitlements, and fully interchangeable between counters.  Such securities would be designated as the HKD-RMB Dual Counter Securities and be published by HKEX from time to time after the rollout of the model.