Hong Kong Doubles Yuan Liquidity to Meet Surging Demand

Hong Kong is doubling the supply of yuan available for banks to borrow, a decisive move to satisfy growing global demand and advance China's efforts to internationalize its currency.

Effective February 2, the Hong Kong Monetary Authority (HKMA) will expand its RMB Business Facility to 200 billion yuan (RM113.86 billion). The program allows banks to access yuan loans for up to one year, with rates benchmarked against the Shanghai Interbank Offered Rate.

According to the HKMA, the facility has seen an "overwhelming response" since its launch in October 2025. The initial quota was fully allocated to 40 participating banks, demonstrating intense demand that extends far beyond local corporate needs. The de facto central bank noted that funds have also been channeled to regions including Southeast Asia, the Middle East, and Europe.

Why the Yuan is Gaining Global Traction

Appetite for yuan funding has climbed in recent years, largely because its borrowing costs are significantly cheaper than those for the US dollar and euro. This expansion is designed to reinforce Hong Kong’s position as the leading offshore yuan hub while supporting Beijing's currency ambitions amid shifting confidence in the dollar.

The announcement came "much sooner than expected, indicating stronger-than-expected demand for yuan liquidity in the offshore market," noted Becky Liu, head of China macro strategy at Standard Chartered Bank plc. She added that lower interest rates have made the yuan a far more attractive funding currency.

This trend is reflected in hard data. According to figures compiled by Bloomberg, outstanding yuan loans from China's onshore banks to overseas entities surged to a record 2.52 trillion yuan by the end of 2025, a dramatic increase from 979 billion yuan at the end of 2022.

Figure 1: Data compiled by Bloomberg illustrates the rapid growth in outstanding overseas yuan loans from China's onshore banks, which reached a record 2.52 trillion yuan by the end of 2025.

The RMB Business Facility (RBF) is an evolution of an earlier yuan-funding program launched in February 2025. Its use has been broadened from trade finance to also cover corporate intra-group funding and capital expenditure loans. To support the program, the HKMA maintains an 800 billion yuan currency swap line with the People's Bank of China (PBOC).

Beijing's Broader Strategy for the Yuan

China's central bank has also signaled fresh support for developing yuan business in Hong Kong.

At a forum on Monday, PBOC Deputy Governor Zou Lan announced that China will increase its annual issuance of offshore yuan-denominated government bonds. He also stated that authorities are exploring the potential launch of offshore bond futures.

Analysts see these coordinated moves as part of a larger strategic push. "We see yuan internationalisation accelerating in 2026 as the yuan is gradually emerging into a 'safe haven' currency, backed by its strong economic and trade fundamentals," said Standard Chartered's Liu.

She expects this momentum will lead to more global funding, cross-border settlement, and direct investment being conducted in the Chinese currency.