HKMA plans to launch US$13.7 billion facility to support yuan-settled international trade

The HKMA said the facility would provide yuan funding to banks for trade finance using the onshore interest rate – the Shanghai Interbank Offered Rate (SHIBOR), which is typically lower than the offshore rate – plus a premium of a quarter of a percentage point. The available tenors are one, three or six months, which are longer than the HKMA’s existing yuan liquidity facilities, which cover tenors of up to a week.

The facility was expected to provide “participating banks with access to a stable source of funds at a lower cost, which should make it easier for [companies] to obtain RMB trade finance from banks at lower interest rates”, the HKMA said.

The facility can be used to provide yuan financing to overseas and local companies. The HKMA would adopt a phased approach to allocating quotas to banks and has invited them to register their interest in the programme, along with their desired quotas. It said it would engage with banks in the next two to three weeks.

The use of the yuan for international trade settlement has become more popular as companies seek cost efficiencies and supply chain diversification amid US-China tensions, top financiers have said in recent interviews.