The People's Bank of China, the country's central bank, has appointed Bank of China Hong Kong Holding Ltd (BOCHK)as the sole settlement bank for personal renminbi transactions in the special administrative region.

The decision was made after fully examining applicant banks and after consultations with the Hong Kong Monetary Authority, the central bank said in a statement Wednesday.

Six banks, including HSBC and the mainland-based Bank of Communications, had reportedly submitted applications for the lucrative business.

According to the arrangement, BOC Hong Kong will provide settlement services for Hong Kong banks authorized to conduct personal renminbi business and will be allowed a place in the mainland's interbank foreign exchange market based in Shanghai.

There is believed to be as much as 70 billion yuan (US$8.4 billion) in renminbi banknotes circulating in Hong Kong, as the currency, boosted by China's growing economic strength, becomes increasingly popular in neighboring regions and nations.

Early last month, the central bank announced it would provide settlement services to Hong Kong banks in the areas of deposits, exchange, credit cards and remittances.

The move was expected to better meet the growing demand for renminbi banknotes as travelers cross the border increasingly frequently, analysts said, since it officially opens a channel for the currency to flow back to the mainland.

(China Daily December 25, 2003)