The issue of renminbi-denominated bonds in Hong Kong, hopefully by the end of June, will maintain the city's status as an international finance centre and aid Mainland fiscal reform, Monetary Authority Chief Executive Joseph Yam says.

In his latest Viewpoint article published on the authority's website today, Mr Yam said it will be a small market to start with and secondary-market activity may be slow at first.

But he said Hong Kong's financial system is now able to handle renminbi-denominated activities in two out of the three channels of financial intermediation - banking and debt. With the renminbi included alongside the Hong Kong dollar, the US dollar and the euro, among the currencies the city's financial infrastructure is able to handle, it will also be possible for the equity channel to follow suit; in other words, for share listing and trading to be denominated in renminbi, if there is demand.

Mr Yam said exchange controls on the Mainland will gradually be removed and this may come faster than expected. Noting the relaxation of capital outflow requires great emphasis on controllability, gradualism and keeping the initiative, he said Hong Kong will be the best place for controlled experiments.