The Hong Kong government promotes the payment of government expenditures in RMB. Will the status of the Hong Kong dollar be shaken?

Author, Pan Bolin

Character, BBC Chinese Special Correspondent

Published on September 22, 2026

Last updated: 2 minutes ago

Reading time: 4 minutes

In its first five-year plan, the Hong Kong government proposed to take the lead in promoting "payment of government expenditures in Renminbi", which attracted attention from the outside world as to whether the status of the Hong Kong dollar would be shaken.

According to Chief Executive Li Ka-chiu, items considered to be settled in RMB instead of Hong Kong dollars include the cost of training civil servants in mainland China and the purchase of Dongjiang water from Guangdong Province, Hong Kong's daily water source.

An economist pointed out to BBC Chinese that the Hong Kong government hopes to establish a "demonstration effect" and may even "collect taxes in RMB" in the future to increase the confidence of other countries in using RMB to trade gold and invest in stocks in Hong Kong.

The analysis pointed out that although the role of the Hong Kong dollar as legal tender remains unchanged, as China reduces its holdings of U.S. Treasury bonds, the Hong Kong government's allocation of the Exchange Fund's asset portfolio becomes more diversified. Future purchases of RMB bonds, etc., are one step in "de-dollarization."

Why increase RMB payment?

The Hong Kong government proposed in its first five-year plan that it will take the lead in researching and promoting the use of RMB to pay government expenditures in more appropriate scenarios to strengthen Hong Kong as a global offshore RMB business hub.

Zhuang Tailiang, associate professor of the Department of Economics at the Chinese University of Hong Kong, described to BBC Chinese that in the past, the Hong Kong government played a role in formulating policies and building financial infrastructure in promoting the RMB, such as issuing RMB bonds and allowing Hong Kong stocks to be settled in RMB. The current role is to personally pay government expenditures in RMB, hoping to play a leading role in promoting the use of RMB by more private companies.

He pointed out that the Hong Kong government is establishing a system for RMB income and expenditure.

In terms of revenue, the government passed legislation in July this year to allow stamp duties for dual-counter securities RMB counter transactions to be calculated and paid in RMB, which is expected to be implemented in mid-2027.

Zhuang Tailiang believes that the government may even study allowing some taxpayers to pay taxes in RMB in the future. "I think the government may gradually collect taxes in RMB. If some foreign companies do business in the mainland in Hong Kong and they accept RMB and they are willing to pay taxes, the government will accept it. The entire mechanism has been established, and the RMB can be pushed further to make more people accept it."

He pointed out that the more RMB circulates and is used in Hong Kong's real economy, it will increase the confidence of other countries in using RMB, allowing other countries to use RMB to buy and sell gold, invest in stocks, etc. in Hong Kong.

Zhuang Tailiang added that the Exchange Fund's holding of RMB assets brings income; the Hong Kong government has issued RMB bonds in recent years, and these RMB income can be used for government expenditures.

"Ming Pao" reported in February this year that the newly issued RMB bonds under various government bond programs since 2019/20 amounted to 44.3 billion yuan (HK$51.8 billion; US$6.6 billion), accounting for about 8.5% of the total issuance, and more than 90% of the remaining bonds were Hong Kong dollar bonds.

Xu Jiajian, chief economist of Orientis, pointed out that whether the Hong Kong government actively issues RMB bonds or uses RMB to pay expenses, it is creating application scenarios to make RMB circulate more vigorously in the market. "If it had taken the step of issuing RMB bonds before, now it will be used to buy things after the issuance. Seeing that the market is not easy to start such large-scale applications, the Hong Kong government took the lead."

He bluntly said that apart from investment considerations, if the real economy lacks application scenarios for RMB, no matter the government, private companies or citizens, they will not reserve too much RMB. The Hong Kong government's initiative to increase RMB payments will set an example.

Will the status of the Hong Kong dollar be threatened?

Article 111 of Hong Kong's Basic Law stipulates that "the Hong Kong dollar is the legal tender of the Hong Kong Special Administrative Region and continues to circulate."

The Hong Kong Monetary Authority stated in a Q&A on its official website that even if the RMB is fully convertible, it does not expect any change in the legal tender status of the Hong Kong dollar.

However, after the Hong Kong government announced that it would expand the use of RMB to pay government expenditures, it still aroused market concerns.

Pantheon Macroeconomics issued a report stating that the Hong Kong government has made an unprecedented decision to start paying part of its expenditures in RMB, which is bound to raise concerns about the importance and credibility of the Hong Kong dollar.

The report believes that despite the above-mentioned side effects, the intention of the authorities is to further deepen the RMB ecosystem. The Hong Kong government has issued RMB bonds, so finding more ways to use these funds will help increase issuance and circulation.

Xu Jiajian pointed out that when the Hong Kong government’s demand for Hong Kong dollar expenditures decreases, it is expected to reserve some RMB in the future. However, he pointed out that the Hong Kong dollar is still the legal currency of Hong Kong and the monetary base of the Hong Kong dollar is supported by foreign exchange reserves. As long as the Hong Kong government holds sufficient US dollar assets and ensures that the linked exchange rate is not decoupled, market confidence will not be shaken.

Scholar Zhuang Tailiang believes that the Hong Kong dollar has the role of a legal currency and is pegged to the US dollar under the linked exchange rate. The Hong Kong government also holds a lot of US Treasury assets. He bluntly said that the Hong Kong government only uses RMB to pay for cross-border transactions in a small amount and its impact is limited.

He believes that there are three indicators to observe whether Hong Kong will switch to RMB as the dominant currency. "The first is the payment of wages by civil servants; the second is the payment of wages by private organizations; and the third is the purchase of properties. If developers are willing to accept RMB, and the largest number of these transactions are completed, the RMB will basically dominate (more than) the Hong Kong dollar."

As China reduces its holdings of U.S. Treasury bonds, Zhuang Tailiang predicts that the Hong Kong government will also develop more RMB assets to diversify its asset portfolio, such as buying RMB bonds, which is a step in the gradual "de-dollarization".

Data show that in recent years, the Hong Kong Exchange Fund has increased the proportion of non-US dollar assets in its investment portfolio. Yu Weiman, President of the Hong Kong Monetary Authority, said in May this year that the proportion of U.S. dollar assets in the Exchange Fund will be less than 80% by the end of 2025. The authorities also tend to diversify assets. In the past few years, they have also shortened the terms of U.S. dollar assets held in the hope of increasing liquidity amid global uncertainty.

This year's policy address proposed that the Hong Kong Monetary Authority is studying the Exchange Fund's appropriate increase in gold holdings and participation in Hong Kong's spot and futures markets.

The prospect of dual-currency circulation

In Macau, which is also a Special Administrative Region, the legal currency is the Macau Pataca, but businesses in the market sometimes welcome tourists to use Hong Kong dollars.

Xu Jiajian pointed out that the Macau example reflects that in addition to legal currency, another currency may be more commonly used in commercial transactions with the consent of both parties. For example, it is very popular in Bhutan to accept Indian rupees and US dollars as transaction currencies.

He believes that at the level of daily transactions, many businesses in Hong Kong are also willing to charge independent travelers in RMB, but overall, there are always exchange controls on RMB, and the advantage of free convertibility of Hong Kong dollars is more attractive. "If you need to pay in RMB on a daily basis, you can prepare more; but when you save and buy assets, it is always Hong Kong dollars."

Economist Zhuang Tailiang analyzed that Macau's economy relies on the gambling and tourism industries. Since many tourists come from Hong Kong, some tourists prefer to use Hong Kong dollars for transactions instead of exchanging Macau pataca. Eventually, although the Macau pataca is legal tender, Hong Kong dollars are more commonly used in some transactions.

He pointed out that the Macao example reflects that the local circulation and use of a currency and whether it is legal tender are two different things; even if multiple currencies can be circulated, there is usually only one legal tender in a place.

He believes that if the U.S. dollar is no longer the world's most important international currency in the future, Hong Kong may need to reconsider the Hong Kong dollar's linked exchange rate system, such as finding other currencies as "anchors" or pegging it to a basket of currencies.

Data shows that during the British colonial years in Hong Kong, the Hong Kong dollar was pegged to the pound from 1935 to 1972. Afterwards, it experienced a brief period of pegging to the U.S. dollar and free floating. The Hong Kong government finally announced the implementation of a linked exchange rate in October 1983. The Hong Kong dollar was pegged to the U.S. dollar, keeping the Hong Kong dollar exchange rate stable within the range of 7.75 to 7.85 Hong Kong dollars per U.S. dollar. The system has been in place for about 43 years.

What expenses are in RMB?

At present, the Hong Kong government uses RMB to pay only a very small proportion of its expenditures.

On the day the policy address was released, Hong Kong local media quoted government sources as explaining that the government currently spends an average of about 20 million yuan (HK$23.3 million; US$2.98 million) per month on different expenses, including mainland pension plans and civil servant training in the mainland.

Based on the overall government expenditure budget for 2026-27 of HK$843.4 billion (715.9 billion yuan; US$107.5 billion), the current payment is about 240 million yuan per year, accounting for only about 0.03% of the total expenditure.

Chief Executive Lee Ka-chiu attended a radio program on September 18 and stated that some contracts between the Hong Kong government and the mainland would be settled in RMB instead of Hong Kong dollars, such as the cost of training civil servants in the mainland and the purchase of Dongjiang water, Hong Kong's daily water source, from Guangdong Province.

Information disclosed by the Legislative Council shows that in 2025-26, the Hong Kong Civil Service College's revised budget for mainland training is HK$35 million, and the budget for purchasing Dongjiang water is HK$5.282 billion. The total investment involves HK$5.317 billion (US$678 million; 4.546 billion yuan), accounting for about 0.6% of the revised budget for the Hong Kong government's annual expenditure for that year.

BBC Chinese inquired with the Financial Secretary's Office, the Civil Service Bureau and the Water Supplies Department.

The Bureau confirmed that the Civil Service College’s revised budget for mainland training in 2025-26 is HK$35 million. In addition to the College, various departments or grades will also arrange for civil servants under their jurisdiction to participate in mainland training courses, study tours and exchange activities based on their work and professional development needs. The relevant training expenses are borne by each department. The College does not maintain relevant expenditure data.