Record-low real interest rates on HKD deposits spur demand for renminbi

Yields on Hong Kong-dollar denominated debt fell this week, stimulating increased demand for RMB-denominated assets as China has made it easier for Hong Kong residents to invest, Bloomberg reported. The Hong Kong dollar is linked to the US dollar and has therefore been steadily losing value against the renminbi. Last week China’s government sold US$10.8 billion worth of RMB-denominated bonds, also known as dim sum bonds, in Hong Kong markets, offering record-low yields of 0.6% for a three-year bond. Through a combination of government debt offerings and relaxed restrictions on buying mainland securities, renminbi-denominated holdings in Hong Kong have increased six-fold in the first half of 2011.