Page 17 - Building a Treasury Centre for Sustainable Growth

CROSS-BORDER PAYMENT SYSTEM

Hong Kong SAR has established six cross-currency Payment-versus-Payment (PvP) links among the HKD, USD,
EUR and RMB Real Time Gross Settlement (RTGS) systems, which improves efficiency and eliminates cross-border
FX transaction risks arising from time lags and time zone differences. Hong Kong SAR’s USD RTGS system has three
cross-border PvP links with the RTGS systems of Malaysia, Indonesia and Thailand. There are also cross-border
payment arrangements with the Domestic Foreign Currency Payment System in Mainland China (which facilitates
foreign currency funding and liquidity management of Mainland China banks and commercial payments).

Additionally, various banks in Hong Kong SAR also settle eligible FX trades through the CLS system covering 17
currencies, thereby further mitigates cross-border payment risks. The Hong Kong Monetary Authority (HKMA) also
participates in the oversight of the CLS system through the CLS Oversight Committee.

Hong Kong SAR’s proximity to Mainland China is another unique advantage. Hong Kong SAR is the key centre for
offshore RMB, and the RMB RTGS (being an extension of Mainland China’s National Advanced Payment System)
facilitates the efficient processing of interbank payments, RMB bulk clearing, and settlement of payments. There are
also strong links with the debt securities settlement systems between Hong Kong SAR and Mainland China, with the
introduction of a Bond Connect Linkage Service that allows Mainland China and overseas investors to trade, settle
and hold bonds in both markets.

Hong Kong SAR has also taken the initiative in incorporating and developing new technologies for use in payment
systems. With new technologies and services being introduced regularly, further innovations are expected to come
into operation in the near future. Such developments include:
1. Introducing the Faster Payment System (FPS) by the HKMA and operated by the Hong Kong SAR Interbank
Clearing Limited at local level. The FPS is a payment system through which Hong Kong SAR individuals can make
payments to other persons and merchants instantly
2. Facilitating cross-border initiatives, including the linkage between eTradeConnect and the People’s Bank of
China’s (PBoC) Trade Finance Platform for cross-border trade finance transactions, and the possible expansion of
the FPS into providing cross-border payment services through connecting the FPS with other payment systems
3. Incorporating the potential of fintech into payment systems and cross-border payments generally, including
research on central bank digital currency (CBDC) in cross-border payments through the m-CBDC Bridge by the
HKMA, and the HKMA’s preparation for the use of e-CNY (digital RMB issued by the PBoC) for making cross-
boundary payments in Hong Kong SAR

These developments all work to highlight Hong Kong SAR’s current capabilities and future potential for multinational
corporations looking to establish a CTC in the Asia-Pacific region, particularly those with a focus on Mainland China.

EXCHANGE CONTROL

There is no foreign exchange control in force in Hong Kong SAR and the HKD can be freely convertible into other
currencies. The HKD is pegged to a narrow trading band between HK$7.75 and HK$7.85 per USD, which helps
provide a stable exchange rate environment that allows Hong Kong SAR to develop into an international financial
centre.

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