Hong Kong needs to prepare to contribute to and take advantage of the renminbi's growing international role, Monetary Authority Chief Executive Joseph Yam says.

In his latest Viewpoint column posted today on the authority's website, Mr Yam said Hong Kong can prepare by improving its financial infrastructure through the inclusion of the renminbi as one of the key currencies for effecting transactions.

Mr Yam said Hong Kong has started successfully with a few areas of renminbi banking business, the most important area in the future development of the city's financial system and its status as an international financial centre.

US dollar depreciating

He said the world's reserve currency economy is facing structural problems and the depreciation of the US dollar has raised once again the question of how long the natural life of a reserve currency can be.

"And there are, for the time being, no dominant alternative candidates for the world's reserve currency. There are other types of structural issues in Europe and Japan that inhibit their currencies from assuming a leading role. The story may be different in 20 or 30 years' time, and in this connection I must point out the possibility of the renminbi becoming such a candidate if the pace of reform, liberalisation, growth and development on the Mainland continues apace."

He said with increasing economic and trade integration, there is a case, for convenience and for the further promotion of closer economic relationship, for the much greater use of the renminbi as the currency for settling trade transactions between the Mainland and its trading partners, without having to go through the US dollar. The renminbi may also in time emerge as the anchor currency of the region.