Some of the ideas that I have just mentioned will take time to materialise. Some may need a testing ground to pilot before being scaled up. On this, the Guangdong-Hong Kong-Macao Greater Bay Area or Qianhai could function as pilot zones in the Mainland to test new crossboundary initiatives with Hong Kong. The Wealth Management Connect is a case in point. Conclusion 21. Ladies and gentlemen, what I have presented to you is a very brief summary of our thoughts on the role of Hong Kong in promoting the international use of RMB, but even that, I am sure you will agree, is already quite a menu. And we are already actively exploring some of these policy initiatives with our Mainland counterparts. But we cannot do it all on our own. While we need to create the necessary policy headroom, the market should be the one driving the process of RMB internationalisation. The active participation of market players is critical. I would therefore warmly welcome views and suggestions from Members of TMA and its subcommittees on ways to enhance the liquidity, to expand the product diversity and to build an efficient infrastructure in order that we can further develop the role of the Hong Kong markets in the process of the internationalisation of the RMB. 22. With its 76 institutional members and over 3,000 individual members, the TMA has been providing broad-based support to foster market development in Hong Kong. We believe the HKMA and the TMA’s relationship can also be a mutually beneficial one.
It is only when you have the right place to invest your money that you will have the incentive to use and hold the currency you gain from merchandise and services trade. In other words, RMB internationalisation could first be driven by the advancement of its function of store of value, which should in turn help promote greater usage of RMB as a unit of account and a means for payment and settlement for other purposes like trade. And Hong Kong is well positioned to help catalyse this process. 12. The question is “how”. We see three factors that are required to promote the use of RMB in capital market transactions in Hong Kong. These are liquidity, products and infrastructure. 13. First is liquidity, which has to be the most essential ingredient in developing markets. Without that, it would be hard for the market to conduct transactions smoothly and efficiently or to develop products. As I mentioned earlier, Hong Kong has the largest RMB deposit base among all offshore markets and the most active RMB FX market, and both have been growing steadily in the last few years, partly benefiting from the very strong growth in the turnover of the Stock and Bond Connect schemes. For example, the Stock Connect received an average daily turnover of RMB160 billion in the first eight months of this year, up 43% increase from last year. The Bond Connect received an average daily turnover of RMB26 billion during the same period, up 34% from last year.