Xu Zhengyu: Continue to enrich the offshore RMB ecosystem and strengthen Hong Kong's global offshore RMB hub status.

In a meeting of the Legislative Council, the Director of Financial Services and the Treasury in Hong Kong, Christopher Hui Ching-yu, responded to questions from Member of the Legislative Council Martin Liao regarding the enhancement of Hong Kong's position as an offshore Renminbi hub. He mentioned that the Hong Kong Exchanges and Clearing Limited (HKEX) will introduce the "Hong Kong Dollar - Renminbi dual counter model" in 2023 to provide investors with a more diversified trading choice. In addition to stock trading, Hong Kong also encourages mainland institutions to issue offshore Renminbi bonds and promote the issuance of Renminbi-denominated exchange-traded funds and other products. In the past year, several measures supporting offshore Renminbi business have been implemented. Regarding insurance, the insurance industry has been developing Renminbi-denominated policies and recently promoted diversified currency insurance products, including Renminbi, to meet market needs. Hui stated that Hong Kong will continue to build the ecosystem for offshore Renminbi and provide more investment opportunities for domestic and foreign investors to strengthen Hong Kong's position as an offshore Renminbi hub. Question: In the 2024 Policy Address, the Chief Executive proposed to continue optimizing the "Connectivity" mechanism to strengthen Hong Kong's position as the world's largest offshore Renminbi hub and facilitate Renminbi internationalization. Therefore, can the government inform this Council: (1) Given that the Hong Kong Exchanges and Clearing Limited (HKEX) introduced the "Hong Kong Dollar - Renminbi dual counter model" in June 2023, providing investors with various currency options and more investment opportunities, the total transaction amount recorded since the implementation of the dual counter model, and the proportion of transactions in the securities market; (2) Has the operational situation and effectiveness of the dual counter model been evaluated based on the figures from (1)? What policies will be implemented in the future to further promote the adoption of the dual counter model by more listed companies and investors? (3) HKEX previously announced the launch of a single stock multi-counter arrangement this year to optimize the settlement procedures for multi-counter eligible securities within the central clearing and settlement system, including dual counter securities. What is the progress of the implementation of this arrangement? (4) Given the government's commitment to work with regulatory agencies and HKEX to continue efforts to promote various aspects of offshore Renminbi business and enrich the product ecosystem, what policies and measures will be taken to further enrich Hong Kong's Renminbi investment products (such as promoting more institutions to issue Renminbi-denominated exchange-traded funds and introducing insurance products) to consolidate Hong Kong's position as an offshore Renminbi hub? Response: Hui stated that Hong Kong is a leading offshore Renminbi hub globally with the largest offshore Renminbi pool and markets for offshore Renminbi foreign exchange and over-the-counter derivatives, offering diversified Renminbi products and services. With the support of the Central People's Government, the government, regulatory agencies, and the HKEX have been actively promoting Renminbi securities issuance and trading in Hong Kong, continuously optimizing the connectivity mechanism to strengthen Hong Kong's role as a global offshore Renminbi hub and facilitate the internationalization of Renminbi. Regarding the four parts of the question, after consultation with the Hong Kong Monetary Authority (HKMA), the Securities and Futures Commission (SFC), and HKEX, the response is as follows: (1) and (2) To meet the increasing demand of global investors for Renminbi assets allocation, the government, regulatory agencies, and HKEX have been actively promoting Renminbi securities issuance and trading in Hong Kong. Therefore, HKEX introduced the "Hong Kong Dollar - Renminbi dual counter model" in 2023 to provide investors with more diversified trading choices, allowing them the flexibility to trade securities in Hong Kong dollars or Renminbi according to their needs. HKEX also introduced a dual counter market maker mechanism, enhancing the liquidity of Renminbi stocks through providing bid and ask quotes on the Renminbi counter. The government has amended legislation to exempt stamp duty on specific transactions of market makers in the dual counter securities market to create favorable conditions for market makers to conduct liquidity and volume supply activities at lower trading costs. The dual counter model and the dual counter market maker mechanism have been running smoothly since their implementation. Currently, there are 24 listed companies using the dual counter model to offer trading of securities in Hong Kong dollars and Renminbi. In addition, 12 exchange participants have been designated as market makers to conduct liquidity and volume supply activities. From June 2023 to mid-February 2025, the total transaction amounts in Hong Kong dollars and Renminbi counters of dual counter model securities reached approximately HK$16.5 trillion and RMB 42 billion, accounting for about 31% of the total turnover in the spot securities market. Under the dual counter model, HKEX and market participants (including listed companies, investors, securities firms, banks, and market makers) have accumulated practical experience in issuing, trading, settling, and converting securities in different currencies, particularly for stocks with high liquidity, to prepare for further development of the Renminbi securities market. As cross-border Renminbi payment amounts and the global share of Renminbi payments continue to grow, we believe the number of overseas investors holding Renminbi will gradually increase. At the same time, the China Securities Regulatory Commission announced in 2024 its support for including Renminbi stock trading counters in the "Stock Connect" program, and regulators and exchanges in both regions are actively preparing the necessary technical infrastructure to allow mainland investors to buy and sell Hong Kong stocks in Renminbi. The government and HKEX will continue to expand and deepen coverage of existing and potential issuers through targeted promotion activities, thematic roadshows, speeches, and forum exchanges to attract more listed companies to adopt the dual counter model. (3) To improve the efficiency and scalability of trading and settlement of multi-counter securities (such as dual counter securities and exchange-traded products), HKEX has announced the launch of a single stock multi-counter arrangement to optimize the settlement procedures for multi-counter eligible securities within the central clearing and settlement system. Under the optimized arrangement, transactions on different trading counters will be settled in the designated main settlement counter to eliminate the need for settlement participants to perform conversions between counters for settlement purposes. Additionally, a new "net settled with the same stock" procedure will be implemented to settle the balanced positions of securities in one currency counter in the opposite direction of the balanced positions of securities in other currency counters.Cancel each other out.Regarding optimization measures, the utilization of multi-counter securities as a single security feature will be optimized to enhance settlement efficiency. Relevant information, including arrangements, technical documents, reports, data samples, and FAQs, have been uploaded to the designated webpage of the Hong Kong Stock Exchange. To assist market participants in understanding the operation of single-stock multi-counter arrangements, the Hong Kong Stock Exchange will conduct a simulation exercise in the second quarter of this year, and further details will be announced in due course. Depending on technical readiness and regulatory approval, the optimization measures are targeted to be implemented by the end of June this year. The government, together with regulatory authorities and the Hong Kong Stock Exchange, has been actively promoting the development of offshore Renminbi business in Hong Kong to enrich the Renminbi product ecosystem. In addition to stock trading, we have been supporting initiatives to encourage mainland institutions to issue offshore Renminbi bonds, promote the issuance of Renminbi-denominated exchange-traded funds and other products. Since 2009, the Ministry of Finance has been issuing Renminbi sovereign bonds in Hong Kong for 17 consecutive years, with a cumulative total issuance amount of RMB 366 billion by the end of 2024. In addition, this month, five series of sovereign bonds totaling RMB 12.5 billion have been further issued. In the past year, a number of measures to enrich and support offshore Renminbi business have been introduced. Under the Shanghai-Hong Kong Stock Connect program, the eligible product range for trading of exchange-traded funds was expanded in July 2024 to include a total of 91 new fund targets. The Mainland-Hong Kong Mutual Recognition of Funds program was optimized in January this year, including measures such as relaxing the proportion limit of selling mutual funds in the client area, significantly increasing the scale of fund sales. In addition, starting from January this year, Hong Kong off-exchange settlement companies have accepted offshore investors to use onshore government bonds and policy financial bonds held in the "Bond Connect" as collateral, providing greater flexibility for international investors, improving their capital utilization efficiency, and attracting overseas investor participation. Furthermore, both regulatory authorities announced new measures to deepen financial cooperation between the two regions in January. Among them, the southbound "Bond Connect" has extended the settlement time under the infrastructure network and supported the settlement of bonds in multiple currencies. The offshore Renminbi repurchase business with onshore government bonds as collateral was successfully launched on February 10th, with multiple repurchase transactions completed on the first day. The Renminbi trade financing capital arrangement will officially start on February 28th, supporting banks in providing Renminbi trade financing to enterprises, with a total amount of RMB 100 billion. In the insurance sector, the insurance industry has been developing Renminbi-denominated policies and recently promoting a variety of currency insurance products including Renminbi to meet market needs. We will continue to build the ecosystem for offshore Renminbi, promote interconnection measures supported by regulatory authorities in both regions, including incorporating real estate investment trusts into the Shanghai-Hong Kong Stock Connect, and discussing new measures with mainland regulatory authorities. We will also continue to support Hong Kong financial institutions in further increasing attractive investment products, providing more investment opportunities for domestic and foreign investors, and consolidating Hong Kong's position as a hub for offshore Renminbi business.