Chart 3 shows the share of HICP items experiencing price falls, year on year. In terms of expenditure weights, around 20% of the HICP items reported negative annual growth rates in May 2009. This share has increased recently but it remains not so distant from the average of the last decade. Excluding food and energy, the share was lower at 14%. The share of items with negative inflation is subject to significant volatility, partly owing to seasonal factors, such as sales in the shops at certain times of the year. This makes the measure more difficult to interpret. However, it is possible to take account of these factors by comparing the proportion of items with negative inflation rates in any given month with the historical average for the same month. As you can see from chart 4, the share of items with negative inflation rates (excluding energy and food) in the year to May was only a touch higher than the historical average, further confirming that there have been no widespread price cuts so far. Let me dwell on this point. Chart 5 shows the distribution of the annual rates of change in all the items included in the HICP basket, weighted by their expenditure share. This also suggests that price cuts are not generalised, but are concentrated on few items. In May this year the bulk of the distribution – around two- thirds – showed inflation rates above 1%, with some items (heat energy) recording an inflation rate above 10%.
At the same time, over 1,100 renminbi correspondent accounts were maintained by overseas banks with banks in Hong Kong. The amount due to and due from such overseas banks amounted to RMB 128 billion and RMB 146 billion respectively. This is a clear indication that banks from around the world are using Hong Kong’s robust platform and large liquidity pool to offer renminbi services to their customers at home. As more and more companies and financial institutions conduct business and transactions in the renminbi, we will see an increasing number of financial centres offering offshore renminbi business in different parts of the world. These centres can benefit significantly from having an access to the offshore renminbi platform and liquidity pool in Hong Kong. The HKMA is taking proactive steps to aid the private sector in this endeavour. The private sector led Hong Kong – London Forum is an excellent example of this effort. The Forum just held its first meeting in Hong Kong in May this year, and agreed on a number of joint actions in the areas of renminbi liquidity, payment and settlement arrangements and development of products and services, to bring mutual benefits to the growth of offshore renminbi business in Hong Kong and London. One of the key action points agreed at the Forum is to expand cross-market renminbi funding activities through the cross-border collateral management arrangement that will be launched jointly by the HKMA, Euroclear and J.P. Morgan on 25 June.