The current estimated 37.4 billion yuan cost of the Hong Kong-Macau-Zhuhai ‘super bridge’ could rise dramatically if all the contracts are priced in China’s currency, says an academic.
The reason is that the yuan has strengthened recently against the US dollar and the Hong Kong dollar. Yuan-denominated loans also typically attract higher interest rates than loans denominated in HK$ or US$. Using multiple currencies would hedge against that price rise risk, says the expert.
The central government and Guangdong province will, between them, pay seven billion yuan towards the cost of the bridge. Hong Kong and Macau will contribute 6.75 billion yuan and 1.98 billion yuan respectively. The remaining 58% of the cost will be covered by a syndicated loan.
On 16th January, the governments of Hong Kong, Macau and Guangdong invited banks to tender for the position of lead bank for the syndicated loan, which the central government in Beijing says must be denominated in yuan.
Yi Xianrong, a finance and banking professor at the Chinese Academy of Social Sciences, said in comments reported in the Hong Kong media: “There should be an open discussion on what currency they should use, the risks involved and the benefits. They should not have made the decision behind closed doors”.
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