This purpose of this project is to find out the useful ways to grasp the opportunity of the RMB trade settlement pilot scheme In Hong Kong in order to boost the incomes and creates more profits of studying company which is Bank of China. The background is that the cabinet, the People's Bank of China (PBOC), the central bank, decides to expand the scope of liquidation and settlement arrangement for Hong Kong banks to deal with RMB business. The new business will be launched after the technical system is well developed. The central bank will provide liquidation systems for the business. This will enable banks in Hong Kong to operate more asset-related business. The objectives are that develop and provide diversify RMB-related services and products of Bank of China base on the results of research questions. The basic literature review depend on the analysis of three aspects which are the theory of offshore market and offshore financial centre, the hypothesis of Hong Kong's offshore RMB business and the great potential aspects of becoming an offshore RMB centre. The research questions are designed into five aspects of RMB-related banking business which includes the RMB deposits, RMB credit card, RMB cash withdrawal service, RMB bonds and RMB product and service innovations. These research questions are critical and main factors for Bank of China to grasp the opportunity of the RMB trade settlement pilot scheme in Hong Kong. Moreover, this project has the research design descriptors in table form, three data collection methods which include self-administered survey, telephone interview and face to face interview. The sampling method is convenience sampling and the sample size is about 180 interviewees.
Aim
RMB market is a huge and potential market in Hong Kong. The aim of the project is that find out and identify the useful methods to grasp the opportunity of RMB market in Hong Kong in order to create and develop the efficient business strategies of Bank of China. Bank of China will get the huge benefits of RMB market in Hong Kong if this company has the successful RMB-related banking business in Hong Kong.
Background
In this project, I attend to select Bank of China for studying. This company has the unique advantages of RMB market in Hong Kong. We can know the methods to make as much as profits in RMB market via studying the RMB-related banking business of Bank of China in Hong Kong. In addition, Bank of China maintained their market leadership in the RMB-related banking business in Hong Kong and also commanded the largest share of RMB deposits, which surged by 58.5% in 2008.
Given the external-oriented nature of the Hong Kong economy, the economic outlook in Hong Kong for 2009 crucially hinges on the development in the global economy. As a high degree of uncertainty still hovers over the global financial market, the operating environment is expected to remain tough in the coming year and perhaps well beyond. We have seen contractions in our GDP growth, rising unemployment and negative wealth effects. However, Bank of China in Hong Kong is in a better position as we are blessed with the unswerving support of the Mainland, which maintains relatively stable economic conditions and financial strength. The RMB 4 trillion-yuan stimulus plan announced by the PRC Central Government in November 2008 and subsequent policies and measures to protect and stimulate the Chinese economy are expected to give rise to new opportunities for the Hong Kong economy and its financial services sector. Therefore, Bank of China can get the benefits in RMB market through different RMB services and products in Hong Kong. While ensuring our market leadership in Hong Kong's existing RMB banking business, Bank of China expect the imminent launch of the RMB trade settlement pilot scheme that allows the use of RMB as a currency for trade settlement between Guangdong Province, Yangtze River Delta and HKSAR will open a major window of opportunities for expanding the Group's RMB banking business. Moreover, being the clearing bank for RMB-denominated business in Hong Kong, BOCHK proactively developed its RMB remittance and exchange businesses, enhanced its integrated RMB services and maintained its leading position in the RMB-denominated businesses in Hong Kong in 2008. Consequently, this project can help Bank of China to maintain the leading position in the RMB-related banking business market in Hong Kong and increase the income from RMB-related banking business of Bank of China.
Research Questions
How to increase the share of RMB deposits in the Hong Kong`s market?
How to boost the RMB credit card business base on three aspects which includes card issuance, cardholder spending and merchant acquiring volume?
Which locations should be provided more RMB cash withdrawal service via ATMs in Hong Kong?
How to promote and package the RMB bonds to public in order to increase the profits?
How to enhance Bank of China`s capabilities in product and service innovations?
These research questions are critical and main factors for Bank of China to grasp the opportunity of the RMB trade settlement pilot scheme in Hong Kong. According to different RMB-related banking business, these questions can clearly identify what actions should be taken by Bank of China to boost the incomes and profits from the RMB market in Hong Kong. For maintain the market leadership in Hong Kong's existing RMB banking business, Bank of China should develop and provide diversify RMB-related services and products base on the results of these research questions.
Critical review of relevant literature
According to the first article "Hong Kong's Prospects as an Offshore Renminbi Centre" by Hui Wing Fu who is Senior Economist form HKGCC at 12th of January in 2004, the People's Bank of China and the Hong Kong Monetary Authority signed a Memorandum of Cooperation concerning the operation of personal Renminbi(RMB) business in Hong Kong. This marked a major progress in financial business under the CEPA framework. Fostering the development of RMB business in Hong Kong, the memo would lay the foundation for Hong Kong to become an offshore RMB centre, enhancing Hong Kong's role as an international financial centre.
This article mentions the theory of offshore market and offshore financial centre. I think that the Central Authorities attach great importance to the role of Hong Kong as an international financial centre. Four areas of renminbi (RMB) business have been opened up to Hong Kong banks under the first-phase arrangements. The operation of these services has proved very successful, as seen by a steady increase in RMB deposits, smooth transactions and a stable exchange rate. On the basis of the SAR Government's proposal, the Central Authorities have given in-principle approval to extend the scope of RMB business in Hong Kong. This includes raising the exchange limit between RMB and Hong Kong dollar per person per transaction; lifting the credit limit of RMB cards issued by banks in Hong Kong; relaxing the RMB remittance limit imposed on Hong Kong residents; extending RMB settlement to designated merchants in more sectors; and permitting designated merchants in Hong Kong to open RMB cash deposits accounts and exchange the RMB deposits one-way into Hong Kong dollars. In addition, the Central Authorities have also endorsed in principle the operation of a new RMB business in Hong Kong, which will allow Hong Kong residents to issue RMB cheques for a limited amount exclusively for consumer spending within Guangdong Province. The Central Authorities will soon finalize the arrangements and make an official announcement. I believe these new measures will definitely be an important impetus to the comprehensive development of the financial sector in Hong Kong.
Moreover, this article analysis and express the Hong Kong's offshore RMB business. I think that the arrangements for banks to conduct renminbi business on a trial basis signify an important step forward for the development of our banking sector. This will help promote economic integration between Hong Kong and the Mainland, and facilitate cross-border tourist spending. I believe that the banking sector in Hong Kong will seize on this opportunity and provide the relevant renminbi services to the public in the near future. In addition, the arrangements for Hong Kong banks to conduct renminbi business will open a new channel for the flow of renminbi funds between Hong Kong and the Mainland through the banking system. In addition to meeting the demands of the market and the public, the Hong Kong banking sector will also be able to develop new areas of business. This will be advantageous to the Hong Kong banking sector and increase its competitiveness. In the long term, this development will have great significance for developing Hong Kong as an international financial centre. The HKMA will work closely with the PBOC to facilitate banks in Hong Kong launching the renminbi business as soon as possible.
On the other hand, this article mentions two great potential aspects of becoming an Offshore RMB Centre. One is the RMB has the potential to become a major international currency, thereby also becoming a major currency for offshore transactions. Another one is China's overall international trade position is estimated to maintain balance or slight surplus. This is also favorable for Hong Kong's development as the largest offshore RMB centre. I believe that the Central People's Government agrees to expand the scope of RMB business in Hong Kong is another major step in the reform and liberalization of RMB. The expansion of RMB business in a steady and orderly manner is conducive to further strengthening the economic integration between Hong Kong and the Mainland of China, and providing greater convenience to the people of both places amid the ever increasing cross-border flows. The closer financial cooperation between Hong Kong and the Mainland will also help enhance Hong Kong's status as an international financial center.
Research Methods
Research design descriptors
Category
Options
The degree to which the research question has been crystallized
Exploratory study
Formal study
The method of data collection
Monitoring
Communication Study
The power of the researcher to produce effects in the variables under study
Experimental
Ex post facto
The purpose of the study
Reporting
Descriptive
Causal-Explanatory
Causal-Predictive
The time dimension
Cross-sectional
Longitudinal
The topical scope-breadth and depth-of the study
Case
Statistical study
The research environment
Field setting
Laboratory research
Simulation
The participants' perceptional awareness of the research activity
Actual routine
Modified routine
Data collection method
Self-administered survey
The research survey will be designed to collect the data for market in Hong Kong. This research survey is basically separated into five aspects of RMB-related banking business which includes the RMB deposits, RMB credit card, RMB cash withdrawal service, RMB bonds and RMB product and service innovations base on the consumer behavior, demands and interest. Also, this research is implemented by Internet survey.
Telephone Interview
In additional, the same research survey will be implemented by telephone interview. The interviewee can give their ideas and suggest of RMB-related services and products of Bank of China via telephone interview. It can collect the useful ideas from target customers.
Face to face interview
The group interview will be hold to collect the direct opinions of RMB-related business. Bank of China can test the response of new RMB-related services and products from the focus group directly. It is very important part for Bank of China to adjust and refine the RMB-related services and products.
Sampling Method
The convenience sampling will be used in this research. It is because convenience is the non-profitability sampling which is lower cost, more feasibility, limited objective, better time manner and no need to generalize. Furthermore, the efficient and useful RMB-related research should be calculated and collected by a huge quantity of interviewee because of each people almost use banking services in Hong Kong nowadays.
Sample size
In this research, about 180 interviewees will be contacted by self-administered survey, telephone Interview and face to face interview.
