As the Mainland continues to expand its international trade and investment, and becomes more economically integrated with the rest of the world, Chinese traders, investors and financial institutions will face growing foreign exchange risk if they continue to rely on the US dollar. Thus, it is a natural development for Mainland China to allow a wider use of RMB in its cross-border trade and investment. From Hong Kong’s perspective, this policy move presents unprecedented opportunities to us, as we can leverage on our strengths as an IFC and our unique position as a gateway between China and the world to provide a premier testing ground for offshore RMB activities. Offshore RMB business has been conducted in Hong Kong since 2004. While the scope of RMB business was limited to retail banking initially, it has been expanded substantially to cover bond issuance, trade settlement, wealth management and further to ODI settlement in January this year. These developments have built a solid foundation for developing Hong Kong into an offshore RMB center. Let me briefly summarise these developments in three dimensions. The first dimension is RMB financing. Hong Kong is the first place outside the Mainland that has developed an RMB bond market. So far, 34 RMB bonds have been launched in Hong Kong with a total issuance size of 80 billion yuan.
Since the introduction of the QDII scheme, about $ billion worth of investment quotas have been granted up to September 2010. It is likely that a significant portion of these moneys is managed out of Hong Kong. In fact, over 40 Mainland companies providing fund management, securities and futures, insurance, and other services have already established a presence in Hong Kong to manage the funds flowing out of the Mainland and engage in fund advisory businesses. We expect the process of financial liberalisation in Mainland China to be a gradual and controllable one, as it has always been. It is however important to note that this process has begun and Hong Kong is bound to be a key destination as well as the management hub for the expected gradual increase in portfolio flows from Mainland China. This is a trend that financial services providers should not ignore in their business planning process. The wider external use of the RMB Now, let me move on to the second important trend: the wider external use of the RMB. Since the global financial crisis, Mainland China has taken steps to promote a greater use of RMB outside the Mainland. The rationale behind this policy move is easily understandable. At present, much of the cross-border trade and investment between the Mainland and other jurisdictions are conducted in US dollars.