Just wondering what you guys think, and if it would be good, bad or neutral?

It would be good, but it won't happen anytime soon until the Chinese economy has reached a certain development level. Yuan is still strictly controlled by the Chinese government, while the HKD is not and is controlled by the world economy.

Need some economist to explain here :bash:

Yuan banking just started this year and major retailers accept the currency because more mainland tourists are visiting. To some extent Hong Kong has adopted the yuan as a currency to do business, especially in the tourism-sensitive sector. Meanwhile, across the border in Shenzhen, many retailers accept both yuan and Hong Kong Dollars. Both are quite easily interchangeable.

do they still use her majesty's coins?

do they still use her majesty's coins?

Its still usable but they don't make it anymore.

After the handover, the design of the coins changed. The backside no longer carries the Queen's portrait but the bauhinia - HK's official flower. The front sides were not changed, and both styles of coins are jointly in circulation. Other than the backside, all other characteristics of the coins were not changed, so people can't tell the difference unless they actually look at the backside.

20 cents
http://www.info.gov.hk/hkma/eng/moneyhk/eng/images/security/modern/banknotes/20c.jpg

$10
http://www.info.gov.hk/hkma/eng/moneyhk/eng/images/security/modern/banknotes/10.jpg

Keep an eye on how the new eastern european EU nations do if they accept the Euro. Western Europe fears those nations will drag the advanced western economies down, but Eastern Europe feels joining the Eurozone will catapult them to Western European levels of prosperity. This might be an important case study for the Hong Kong/China monetary situation. It'll happen eventually, but first the RMB will have to float freely, instead of being pegged to the US dollar. Give mainland China some more time to develop, and eventually HK will beg to be included in that massive market.

Hong Kong's major tourism-dependent stores are already accepting yuan for payment. Yuan credit cards are also being accepted and money-changers are abundant throughout the city. In substance the yuan is already freely convertible in HK.

The HK/China situation is far different from Europe actually. China will not feel adopting the HK Dollar will increase its wealth. That has never been an issue. Besides, the exchange rate is 100 to 107, so they are very close. Similarly, HK will not fully adopt the yuan because the HK$ is far more internationally convertible than the yuan because of capital controls - a major issue for business transaction settlements. So the status quo remains. On the other hand, a lot of retailers in Shenzhen do prefer the HK$.

, while the HKD is not and is controlled by the world economy.

:

The HKD is pegged to the USD dollar. Its not really contolled by the world economy but the USD. It wouldn't be in HKs best interests to adopt the Yuan as with the HKD, the territory can conduct its own monetary policy based upon their own needs (ie, adjusting the peg). By adopting the Yuan, they are giving up this power and would be subject to Beijing monetary policy, who base their policy on all of China, hence could negatively impact the territory. China really is a 'developing' country (considering the whole country and not just special economic zones) which would have different monetary needs that the sophisticated market of HK. But say 50 years from now after China floats their currency and they become very powerfully economically, then at that point in time it would become practical to adopt the Yuan.

Technically speaking, won't Macau and Hong Kong have to adopt the yuan or RMB once they completely revert to Chinese rule? Basically I'm saying that once their SAR status runs out, the two cities will be completely 100% under the PROC.

Technically speaking, won't Macau and Hong Kong have to adopt the yuan or RMB once they completely revert to Chinese rule? Basically I'm saying that once their SAR status runs out, the two cities will be completely 100% under the PROC.

you are talking about at least 43 years later. who knows what china is going to look like in the next 4 decades?

im sure hk and macao will already be using the yuan by 2040. i mean, china's transition to capitalism is happening really fast, it's hard to know what will the country be like in 10 years. im sure by then the infrastructure will be able to catch up to the economy and the government can loosen up the yuan for its value to be shaped by the economy. then hk and macao can adopt it.

More yuan trades tipped
Pamela Pun, Hong Kong Standard
December 23, 2004

In a further step towards turning Hong Kong into a leading financial intermediary for the mainland, the financial sector may receive the green light to significantly expand dealing in yuan-denominated financial products such as bonds and stocks, a leading mainland economist said.

Ba Shusong, deputy director of the Financial Research Institute of the State Council's Development Research Centre, said Hong Kong would "have bright prospects" in expanding yuan-related businesses when the mainland decides to reform its exchange rate mechanism and move towards currency convertibility.

Any expansion would follow last February's decision to allow Hong Kong's banks to expand personal banking services such as yuan deposits, credit cards, remittances and foreign exchange.

Describing that liberalisation as a "pilot phase", Ba added that "to further develop [Hong Kong] as a yuan offshore centre, Hong Kong should develop yuan-denominated bonds and the stock market".

Hong Kong, he said, could first become a magnet for yuan flowing offshore from purchases of appreciating domestic securities and bonds in Southeast Asian countries such as Thailand and Vietnam, as well as Russia.

"In the medium term, Hong Kong will have bright prospects" if it is able to expand its yuan business.

Ba is a top-ranked mainland economist currently researching the issue of eventual yuan convertibility. He said China has established cross-border capital flows in both directions, and trading volume under the capital account has been expanding rapidly.

China has been inching slowly towards convertibility of its currency on its capital account, a growing necessity as the country's trade skyrockets with the rest of the world. China's integration into the global economy has picked up considerable speed since the country's entry into the World Trade Organisation in 2001.

Several financial academics with the Chinese Academy of Social Sciences have been researching Hong Kong's growing role as a yuan intermediary with the outside world since the middle of last year.

"I believe a satisfactory scheme can be found," Ba said, declining to give further details.

Hong Kong's bankers have been vainly lobbying the central SAR financial institutions to conduct yuan-denominated loan business for months, but without a positive response.

The liberalisation is not expected to be extended to conventional loans any time soon, however. Yi Xianrong, a veteran financial expert with the social science academy, said it is unlikely that Hong Kong's banks will be allowed to make yuan loans soon, especially to engage making short-term loans.

China's authorities, he said, continue to be concerned that speculators would be able to borrow yuan in Hong Kong to bet on currency appreciation.

It is possible, however, Yi said, that the central government may give the nod to long-term yuan loans through such vehicles as yuan bonds during the gradual freeing up of the currency.

The yuan is only convertible under the trade account but is strictly controlled under the capital account, or the portion of the international balance of payments that covers investment flows from one country to another.

In the medium term, Yi added, China's reform of the yuan exchange rate mechanism will go along with gradual relaxation of the capital account.

"The exchange rate is only one of the risks" that investors face, he said.

Ba also predicted that Beijing would further raise interest rates next year to cool the mainland economy.

The gap between the domestic interest rate and enterprises' return on investment is two to three percentage points, he said, indicating that there is room for a tow to three percentage points rate boost next year.

In October Hong Kong Monetary Authority (HKMA) chief executive Joseph Yam proposed expanding the SAR's yuan business by letting non-residents open deposit accounts, using the currency for cross-border trade, and for bond sales.

Yam said the government would study the issue further before submitting formal proposals to the State Council, but added that "any new initiatives will take time and will not happen overnight".

"Further development of yuan banking business in Hong Kong depends on the pace of financial liberalisation on the mainland," Yam said in his weekly online column.

"But the banking system in Hong Kong should be prepared to take advantage of new developments."

It is possible, however, Yi said, that the central government may give the nod to long-term yuan loans through such vehicles as yuan bonds during the gradual freeing up of the currency.


:yes:

Just checking...the Yuan is pegged to the USD too right? I recall there is quite a bit of angst over here about it...(among economists that is.)

Just checking...the Yuan is pegged to the USD too right? I recall there is quite a bit of angst over here about it...(among economists that is.)

Yes, that's why the rate between HKD & Yuan barely flucuates. Yuan should be good for the HK economy.