HONG KONG, Sept. 26 (Xinhua) -- To ensure sufficient market liquidity for the expansion of offshore renminbi (RMB) business and further facilitate the use of offshore RMB in the real economy, starting from Oct. 9, the Hong Kong Monetary Authority (HKMA) will introduce the RMB Business Facility (RBF) with enhanced terms and an extended scope of eligible RMB financing activities, the HKMA announced Friday.

Eddie Yue, chief executive of the HKMA, said in an article published on Friday that the RBF will be implemented in three phases. In phase 1, starting from Oct. 9, banks which have been assigned a quota in February this year under the RMB Trade Financing Liquidity Facility (TFLF), or participating Authorized Institutions (AIs), will see a reduction in the facility's interest rate, with the existing spread of 25 basis points removed, thus tracking the Shanghai Interbank Offered Rate. These participating AIs will also be allowed to on-lend RMB funds obtained from the RBF to their overseas intragroup banking entities to support the provision of RMB trade finance to the entities' overseas corporate customers.

Phase 2 will begin on Dec. 1, when the scope of eligible RMB financing activities will be broadened to cover certain RMB capital expenditure (capex) and working capital term loans, increasing the types of potential use cases of the RBF for participating AIs and their overseas intragroup banking entities significantly. Banks will be able to access a more predictable and stable source of RMB funds that enables them.

In phase 3, with effect from Feb. 2, 2026, participating AIs will be allowed to substitute collateral during the term of repo transactions. The lifecycle management of collateral and settlement, including collateral substitution and other relevant processes, will be fully automated, enhancing collateral market liquidity and supporting the continued development of Hong Kong's bond market.

Yue said that starting from Oct. 9, the HKMA will enhance the existing RMB liquidity facility. Specific measures include the reallocation of intraday and overnight RMB funding quotas, as well as the introduction of two-week and one-month repo transactions for T+1 settlement.

Yue noted that market demand for the RMB as a funding currency has surged recently. The RMB loan-to-deposit ratio in the banking sector rose from around 20 percent in September 2022 to over 90 percent in June 2025, while corporates are increasingly seeking longer-term RMB loans. ■