China allows HK to invest in stocks


SHANGHAI — China said it had licensed the Hong Kong Monetary Authority (HKMA) to invest in the mainland’s stock and bond markets in the latest move to give its currency a greater global role. The HKMA, the former British colony’s de facto central bank, was granted the license last week under the qualified foreign institutional investor scheme, the China Securities Regulatory Commission said. The agency did not give any details in a brief statement posted on its website, but foreign institutions have to apply for investment quotas before making any investments. Norway’s central bank and Malaysia’s central bank previously won investment quotas of US$500 million and US$200 million respectively, after they were granted the QFII status. The approval will enable the HKMA to invest part of its US$266.1 billion foreign exchange reserves in the mainland’s yuan-denominated capital markets at a time when Beijing is seeking to internationalize the currency.

In the past two years, China has pushed for greater use of the yuan abroad, signing currency swap arrangements with several nations and launching trials for yuan trade settlement with a number of mainly Southeast Asian countries. It has also allowed Chinese brokerages to sell yuan-denominated funds in Hong Kong to provide investment channels for yuan holdings and encourage more companies to use the yuan instead of the dollar to settle trade deals.