OREANDA-NEWS. March 14, 2014. Agricultural Bank of China (ABC) increased RMB working capital in its Hong Kong branch by RMB 200 million, its first attempt to output RMB capital outside the Chinese mainland, in a move that is crucial for the progress of RMB internationalization.

Actively responding to the RMB internationalization strategy of the state: The national 12th Five-Year Plan proposed to expand the use of RMB in cross-border trade, thereby elevating RMB internationalization to the national strategy. Chinese banks in Hong Kong are faced with new and broader markets amid the flourishing Chinese economy, implementation of the "Going Abroad" strategy and acceleration of the construction of an offshore RMB center in Hong Kong. Increasing RMB capital in the Hong Kong branch was an important step taken by ABC in response to the RMB internationalization strategy of the state. ABC’s Hong Kong branch could promote its cross-border RMB business by providing more banking services for enterprises going abroad through enhanced procedures and innovative products.

Steadily funding ABC Hong Kong’s RMB business development: RMB assets in ABC’s Hong Kong branch grew rapidly in line with China's cross-border RMB settlement business volume expansion, but limited and unstable RMB capital resources hindered this growth. As a result, ABC's move offered stable capital support, thus widening the RMB capital source and improving ABC Hong Kong’s cross-border RMB service capacity.

Bringing ABC's advantage of abundant RMB capital into full play and expanding the use of overseas capital: With abundant sources of RMB capital in the Chinese mainland, ABC's increase of RMB capital in Hong Kong could improve the interaction between and synergic growth of domestic and overseas branches. It also has the potential to sharpen its competitiveness in the global market by supporting the cross-border RMB business in overseas branches.