The weakened Chinese yuan is driving business to Hong Kong as investors and individuals are rushing to secure higher-yielding bank deposits, insurance, investment products, and US dollars.
The nation’s economy suffered worst in June and July, driven by trade, inflation, and lending decline as domestic and overseas demand dried up. The government’s piecemeal plan to revive the country’s growth also received a stale reception from investors, which further added to the pressure facing the currency.
In total, the yuan lost 5.4% of its value against the US dollar this year, 7% accounting for the last 12 months, according to a report from the SCMP.
These currency troubles have led to renewed, booming opportunities for the Hong Kong market, with sales of new life insurance policies from the Fragrant Harbour to mainland China jumping to HK$9.61 billion from the previous quarter.
“More mainland customers will come to Hong Kong to exchange their yuan into Hong Kong dollar or US dollar deposits, or buy investment products in these currencies as a hedge,” independent currency analyst Jasper Lo said. “Investors can enjoy higher interest rates offered by banks in Hong Kong and potential currency gains. It is a good diversification strategy.”
Despite these setbacks, China’s insurance sector still posted an uptick for the half year, with the nation’s monetary regulator revealing that insurance assets in the country grew by 7.6% in the half year, equivalent to US$4.06 trillion.
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