China Construction Bank Corp. (939)’s Hong Kong unit plans to double its yuan-denominated assets to a fifth of its total as the country promotes its currency for international trade and investment.
China Construction Bank (Asia) Corp., which held the equivalent of HK$135 billion ($17.4 billion) in total assets last year, aims to reach the yuan goal in one to two years, Miranda Kwok, chief executive officer of CCB (Asia), said in an interview on May 30. Construction Bank is the nation’s second- biggest lender.
“As yuan internationalization progresses further with less restriction and more flexibility, this will create more room for Hong Kong banks to grow their business,” Kwok said.
China started using its currency overseas in 2004 and has gradually opened investing channels for yuan held offshore, spurring trade financing and yuan lending in the city. Yuan trade settlement handled by Hong Kong lenders jumped at least four fold last year to 1.91 trillion yuan from a year earlier, according to the Hong Kong Monetary Authority.
The People’s Bank of China in October allowed foreign direct investment with yuan raised offshore, creating corporate demand for yuan loans in Hong Kong where borrowing costs are lower than in China. Funds are then used for mainland investment. Lending in the currency surged 16 fold to 30.8 billion yuan in the city last year from 2010, monetary authority data showed.
“The size of yuan loans is currently not comparable to loans in other currencies, but its growth will certainly be the highest on the back of policy support,” Kwok said. “The fact that the yuan lending interest rate in Hong Kong is lower than in China will help bolster lending business in the city.”
CCB (Asia)’s outstanding yuan loans surged 73 percent to 6.18 billion yuan at the end of last year from 2010 and total yuan assets stood at HK$12.63 billion at the end of the year, according to its annual report. The unit’s yuan trade settlement jumped almost seven fold in 2011 from a year earlier, Kwok said.
The unit is also marketing to retail clients to boost yuan deposits. The bank, which has 41 branches in Hong Kong and eight locations in Macau, plans to expand its network in the cities by about a third to as many as 65 branches in the next five years, Kwok said. The bank will open two new branches in Hong Kong this year, she added.
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