Bank Of Shanghai(SH:601229) Zhong Guo Ji Jin Bao·2025-09-26 10:26Core Viewpoint - The Hong Kong Monetary Authority (HKMA) announced the optimization of the Renminbi liquidity arrangement to better meet the liquidity demands arising from the growth of offshore Renminbi business, effective from October 9, 2025 [1][3]. Summary by Sections Optimization Measures - The HKMA will replace the existing Renminbi Trade Financing Liquidity Arrangement with the "Renminbi Business Liquidity Arrangement," maintaining a total liquidity amount of 40 billion Renminbi, redistributing it to 30 billion Renminbi for daytime and 10 billion Renminbi for overnight liquidity [3]. - New T+1 repurchase agreements with two-week and one-month terms will be introduced, alongside existing one-day and one-week options, with rates referencing current market rates [3]. Implementation Phases - Phase 1 (Effective October 9, 2025): Banks will access the new arrangement at lower rates, based on the Shanghai Interbank Offered Rate, eliminating a previous 25 basis point premium. The arrangement will also allow banks to provide Renminbi trade financing through overseas branches [4]. - Phase 2 (Effective December 1, 2025): Specific Renminbi capital expenditure and working capital loans will be included in the eligible business scope, enhancing predictability and stability in Renminbi funding costs for banks [5]. - Phase 3 (Effective February 2, 2026): Introduction of a third-party repurchase service by the Central Moneymarkets Unit (CMU), allowing banks to change collateral during the repurchase period, transitioning to a more automated operation [5]. Market Context - The HKMA noted significant growth in offshore Renminbi business, with the loan-to-deposit ratio for Renminbi in the banking sector rising from approximately 20% in September 2022 to over 90% by June 2025, indicating increasing demand for long-term Renminbi loans [7]. - The HKMA's measures aim to ensure sufficient liquidity in the market to support the expansion of offshore Renminbi business and promote its use in the real economy [8].