Hong Kong dollar's dominance set to be eclipsed by yuan

[HONG KONG] The Hong Kong dollar is expected to have a limited future as the yuan gains more popularity over time, according to a survey conducted among 225 Chinese and Hong Kong business executives by London Business School and the University of Hong Kong.

Though the HKD is still the most popular currency among these executives thanks to its stability and because it is freely convertible, 62 per cent of the executives expect the currency to be phased out eventually, the survey showed.

Three quarters of respondents said this would be met with disappointment, for economic and sentimental reasons, including loss of political independence and the stability of Hong Kong as a financial centre.

"The 'one country-two systems' arrangement for Hong Kong will eventually come to an end, so that would mean the end of a separate currency in any case," said Linda Yueh, Adjunct Professor of Economics at London Business School.

"Whether it's good or bad for the economy of Hong Kong will depend more on how the structure of the economy is rather than just the currency."

More than two fifths of respondents expect the yuan to be viewed as a serious contender to the EUR, GBP, USD and JPY in five to 10 years. A further two fifths anticipate it to achieve that status in less than five years, and 4 per cent believe this will happen straight away, the survey showed.

The yuan remained the fifth most active currency for global payments by value with a share of 1.76 per cent in February, according to global transaction services organisation SWIFT.

In February, 1,131 banks were using the yuan for payments with China/Hong Kong, representing 37 per cent of all institutions exchanging payments with China/Hong Kong across all currencies, SWIFT said. This is an 18 per cent increase over the last two years.

REUTERS