“If you want to see capitalism in action,” said Milton Friedman, “go to Hong Kong.” Beijing is taking him up on that. As it seeks to broaden ownership of its currency, China is using the special administrative region as a giant petri dish. It wants to observe how this profoundly consumerist culture absorbs the renminbi as a medium of exchange, as a store of value and as a unit of account.
Internationalisation had advanced slowly since November 2003, when the People’s Bank of China first agreed to provide clearing arrangements for renminbi business – exchange, remittance and ATM services – for holders of Hong Kong identity cards. Entering 2010, renminbi deposits in the city were just Rmb63bn, about 1.3 per cent of the total. There was little trade settled in renminbi and only a handful of offshore bonds for banks to invest in.
The pace picked up last year. Deposits of Rmb280bn in November were almost 5 per cent of the total, while almost 70,000 mainland companies are now eligible to participate in cross-border renminbi settlement. “Dim sum” bonds number 43, for a combined value of Rmb59bn. And the petri sample is beginning to spread: the Hong Kong Monetary Authority delivered its first lot of renminbi banknotes to Taipei in October.