After four months of rapid growth the rate of increases in renminbi conversion and the amount of renminbi deposits slowed considerably in May, along with the slower pace of renminbi appreciation in recent weeks, Monetary Authority Chief Executive Joseph Yam says.

In his Viewpoint column published today, he attributed the development to the higher handling fee levied by the China Foreign Exchange Trade System on the trading of renminbi by the clearing bank from May 5.

Mr Yam said he has reservations over the suggestion of introducing measures to restrain the growth of renminbi business in Hong Kong.

Demand grows

"Given the increasing economic links between the residents in Hong Kong and on the Mainland, it is inevitable the transaction demand will continue to grow. Further restrictions over transactions conducted under the renminbi business scheme could have the effect of siphoning the flow from this proper, transparent channel, which has been functioning for a few years now, back into obscure and unregulated channels.

"I hope this does not happen because individual residents might be exposed to additional risks they might not be aware of or in a position to manage. We will be observing developments closely to ensure the healthy development of renminbi business in Hong Kong. We also need to address the concerns on the Mainland as best we can."

System capacity increases

Mr Yam said he hopes the intended developments concerning the continuing issue of renminbi bonds in Hong Kong and the use of the renminbi for settling purchases of imports from the Mainland into Hong Kong will not be affected.

"Increasing the capacity of the financial systems of Hong Kong to handle economic and financial transactions denominated in the renminbi, which is what we are trying to achieve, will be of great benefit to the country.

"Our sophisticated financial infrastructure and efficient financial intermediation can help serve the many needs for financial services on the Mainland."