(Yicai) March 17 -- The China Foreign Exchange Trade System, which is the interbank trading and foreign exchange division of the country's central bank, introduced a reference exchange rate for the Chinese yuan against the Hong Kong dollar today to make trading and pricing in the yuan foreign exchange market more convenient.

The new feature is an extension of the existing yuan exchange rate formation mechanism and provides market participants with a richer set of exchange rate benchmarks that make it easier to price and trade the redback against the Hong Kong dollar. It will facilitate cross-border money flows between the mainland and the special administrative region and make exchange rate pricing and risk management less complicated.

The CFETS will publish the reference exchange rate for the yuan against the Hong Kong dollar five times each trading day, specifically at 10 a.m., 11 a.m., 2 p.m., 3 p.m. and 4 p.m, Yicai learned.

The platform already publishes reference exchange rates for the yuan against major international currencies, such as the US dollar, Japanese yen, Euro, and British pound, every hour from 10 a.m. to 11 p.m. The rates are based on real-time trading prices and quotes from China’s interbank foreign exchange market, providing a clear reflection of the actual supply and demand conditions in the forex market that day.

In recent years, many Chinese companies listed in Hong Kong have seen their stock prices climb. Although these firms mainly earn in yuan, their dividends need to be paid out in Hong Kong dollars, leading to a growing demand for dividend-related currency purchases.

At the same time, as the Hong Kong-mainland stock connect mechanism, which allows mainland and Hong Kong investors to trade stocks in each other’s markets through their home exchange, continues to expand, mainland investors' demand for currency exchange-related Hong Kong stock dividends has also been rising year by year.

Editor: Kim Taylor