China Takes The NEXT Step In De-Dollarization, With Hong Kong stocks Priced In Yuan [Video]

China takes the next step in currency globalization, with some Hong Kong stocks priced in yuan

China’s progress in the globalization of its currency takes a significant leap forward as several Hong Kong stocks are now priced and traded in yuan, alongside the Hong Kong dollar. This move, known as the Dual Counter Model, allows about two dozen Chinese companies, including prominent ones like Alibaba and Tencent, to be listed and traded in both yuan and the Hong Kong dollar on the Hong Kong Stock Exchange (HKEX).

Initially targeting overseas investors with yuan holdings, the scheme is expected to expand to include mainland investors through the Hong Kong-China Stock Connect link-up in the future. Hong Kong alone holds an estimated 833 billion yuan $117 billion in offshore yuan deposits, making it an attractive market for yuan-denominated investments.

Fund managers view this development as a reflection of Beijing’s ambitions to enhance the global use of the yuan and offer additional opportunities for yuan-denominated investments. By diversifying investment options, China aims to reduce the risk of capital outflows seeking higher yields in other currencies, particularly the U S dollar.

Ding Wenjie, a strategist at China Asset Management Co China A M C, considers the Dual Counter Model a significant milestone and anticipates its expansion beyond stocks. Ding believes the model will eventually encompass bonds and alternative assets, leading to an increase in overseas asset pools denominated in yuan.

China’s efforts to promote the use of the yuan extend beyond the Dual Counter Model. The country has been actively engaging in yuan-denominated deals with its trading partners worldwide, ranging from oil purchases in the Middle East to commodities trade with countries like Brazil and Russia. Despite geopolitical challenges, such as the invasion of Ukraine, China has maintained strong ties with Moscow.

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