(SINGAPORE) The lack of avenues to repatriate funds into China is preventing the 'dim sum' bonds market in Hong Kong from growing faster, says a senior officer from Hong Kong's Bank of East Asia (BEA).
Brian Li, deputy chief executive of BEA, noted that dim sum bonds - which yuan-denominated bonds in Hong Kong came to be known as - are popular with clients holding yuan deposits.
But corporates that issue dim sum bonds need to find ways to deploy these yuan funds, provided they get approval from China to remit money back onshore or they are trading firms that could undertake trade settlements in yuan.
'I think what would really drive the market further is if we can see a clear path of renminbi repatriation into the interbank bond market in China,' Mr Li told BT. 'Right now, the problem is there are a lot of deposits, but there are not enough assets for the banks to get their hands on.'
Mr Li was in Singapore for BEA's inaugural Corporate Development Day here last Friday, where 150 clients and business associates were invited.
BEA now accounts for 5 per cent of the total yuan deposits in Hong Kong, which according to official estimates stood at 510.7 billion yuan (S$97.4 billion) as at April.
China's securities regulator had announced earlier this year that it was preparing to trial-run a mini-QFII (qualified foreign institutional investor) scheme in Hong Kong, a quota system to allow offshore yuan raised by overseas fund managers to be invested in mainland stocks and bonds. This is different from the original QFII, which allows those same investors to convert foreign currencies into yuan to invest in China.
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