Bank of China Hong Kong (BOC Hong Kong), a subsidiary of the mainland's largest foreign-exchange bank, will apply to be the clearing bank for renminbi currency in Hong Kong.

The bank expects that there will be only one yuan-clearing bank in the initial stages, He Guangbei, BOC Hong Kong chief executive, said yesterday at a seminar organized by the French Chamber of Commerce and Industry of Hong Kong.

Earlier this week, the People's Bank of China, the central bank, signed a memorandum with the Hong Kong Monetary Authority - the city's de facto central bank - on allowing the city to operate four types of renminbi services: deposits, exchange, remittances and credit cards.

He pointed out that the new arrangement, in particular, the use of renminbi credit cards in the city, would help revive Hong Kong's economy.

He expects several sectors, such as retail, food and beverage and hotels to benefit most from the arrangement because it would greatly encourage spending by mainland visitors.

He believes that Hong Kong banks would soon be able to issue renminbi credit cards. Market demand for such cards is great in Hong Kong due to the frequent visits Hong Kong residents make to the mainland, he said.

Asked about the listing plan of BOC Hong Kong's parent company, Bank of China, He said BOC would strive to become the first of the Big Four to be listed overseas.

However, he said BOC is now focusing on reform before the listing.

He said that Chinese banks are facing big challenges as many foreign banks have gained access to the mainland after the country's entry to the World Trade Organization (WTO); and urged the central government to speed up financial reforms to reduce banks' bad and doubtful loans while improving corporate governance.

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