1. Norman T.L. Chan Chief Executive Hong Kong Monetary Authority Bauhinia - Chatham House Research Conference Hong Kong's Development as the Offshore RMB Business Centre 13 June 2011

2. 2 China’s Growth Story : World’s Second Largest Economy 2010 2000 1979 5,879 1,198 261 In US$ bn

3. China’s Growth Story : World’s Second Largest Trading Nation 2000 US ASEAN Western Europe Latin America 264 167 138 154 283 102 92 91 Japan 29 37 121 177 5222 1722 China’s Exports China’s Imports 2010 3 Eastern Europe Central Asia 16 14 5 7 42 13 36 9 1 1 (In US$ bn)

4. 4 China’s Growth Story : Contributing 35% of Global Economic Growth by 2015 China: 35% 0% 20% 40% 60% 80% 100% 200020052010 2015* ChinaBRICS ex ChinaEmerging AsiaUSEuro zoneJapanOthers Share of Global Growth 2000 – 2015 * IMF projections

5. 5 Mainland China’s Trade in 2010 : US$ 3 trillion Hong Kong’s Intermediary Role in China’s Trade Hong Kong Re-export trade with Hong Kong US$ 436bn Hong Kong’s Offshore trade US$ 422bn 5 30% Intermediated through HK : US $ 858 billion

6. 6 Hong Kong as Gateway for Investing in China 7 0 20 40 60 80 100 120 20002001200220032004200520062007200820092010 USD bn 0 20 40 60 80 100 120 FDI from other places FDI from HK China’s Foreign Direct Investments (FDI) USD bn

7. 7 Hong Kong as Gateway for China’s Overseas Direct Investments 0 10 20 30 40 50 60 70 20002001200220032004200520062007200820092010 USD bn 0 10 20 30 40 50 60 70 USD bn ODI to other places ODI to HK China’s Overseas Direct Investments (ODI)

8. 8 Hong Kong as Overseas Fund Raising Centre for Mainland Companies Hong Kong Stock Market : Fund Raising by Mainland Companies 1993-2010 : USD380 bn in total 0 10 20 30 40 50 60 70 939495969798990001020304050607080910 0 20 30 40 50 60 70 Other fund raising activities IPOs USD bn

9. 9 Internationalisation of RMB : A New Era for China’s Growth Story China’s trade settled in RMB since 2009 1H 2010 : 0.7%  2H 2010 : 4%  1Q 2011 : 7% New rules promulgated in January 2011 to allow use of RMB in China’s ODI RMB FDI allowed on case-by-case basis (new rules under consideration) Permission granted to offshore monetary authorities and banks in Hong Kong to access Mainland RMB interbank bond market RMB QFII under consideration

10. 10 Hong Kong as Offshore RMB Centre for Asia and Beyond 2010 China’s RMB trade settlement: RMB 506 bn yuan 1Q 2011 China’s RMB trade settlement: RMB 360 bn yuan 73% handled by banks in Hong Kong RMB 370 bn yuan 86% handled by banks in Hong Kong RMB 311 bn yuan

11. 11 Hong Kong as Offshore RMB Centre for Asia and Beyond Corporate customers Corporates incorporated overseas = 16% 0 100 200 300 400 500 600 JulSepNovJanMarMayJulSepNovJanMar 0 100 200 300 400 500 600 RMB bn 20092010 2011 RMB bn Personal customers

12. 12 Hong Kong as Offshore RMB Centre for Asia and Beyond China Development Bank China Export and Import Bank Bank of China VTB (Russian commercial bank) World Bank Asian Development Bank International Finance Corporation Recent Issuers : Banks Volkswagen Unilever Caterpillar Corporations International organisations 2007 2008 2009 2010 Jan-May 2011 RMB Bond Issues in Hong Kong 10 bn by 3 issuers 12 bn by 4 issuers 16 bn by 4 issuers 36 bn by 16 issuers 28 bn by 28 issuers McDonald’s Hopewell Highways UBS ANZ HSBC

13. China’s Growth Story and Hong Kong’s Role : The Future RMB internationalisation signifies a New Era of rapid growth in China’s trade and investment links with the world Hong Kong is part of China’s growth story in this New Era AND