Hong Kong’s updated yuan financing tool for banks, featuring a quota 150 per cent larger than before, was launched on Friday, giving a significant boost to the use of the Chinese currency in daily global business.
What is the RMB Business Facility?
The RMB Business Facility is a funding window run by the Hong Kong Monetary Authority (HKMA) that allows participating banks to borrow yuan at the relatively cheap Shanghai three-month interbank offered rate, which is about 2 percentage points lower than the US Federal Reserve rate.
The HKMA says the facility enables banks to offer renminbi financing to corporate clients in trade finance, capital expenditure and working capital term loans.
It operates through the city’s currency swap line with the People’s Bank of China, channelling onshore yuan liquidity into Hong Kong’s offshore market.
How big is it?
When the authorities launched its predecessor – the RMB Trade Financing Liquidity Facility – in February last year, a 100 billion yuan (US$14.7 billion) quota was distributed among 40 participating banks, focusing on trade finance.
The scheme was renamed the RMB Business Facility in October, when it was upgraded to include capital expenditure and working capital loans as eligible uses.
In February, the facility’s quota was doubled to 200 billion yuan.
Friday’s upgrade saw the HKMA expand the quota by 150 per cent to 500 billion yuan.