HONG KONG (Reuters) - China will issue more yuan-dominated bonds in Hong Kong and make it easier for firms there to borrow money and sell goods on the mainland, the Hong Kong government said, to help it fight off the economic crisis.
Hong Kong is badly hit by the global financial crisis and its government forecasts that the economy will shrink 3 percent this year, its first full year decline since 1998 at the height of the Asian financial crisis.
"Allowing Hong Kong banks on the mainland to issue renminbi bonds in Hong Kong and consideration by (China's) Ministry of Finance to issue renminbi bonds in Hong Kong will help promote the development of the local bond market and further reinforce Hong Kong's position as an international financial centre," the Hong Kong government said in a statement issued late on Saturday.
The measures were announced after Hong Kong Chief Executive Donald Tsang met Chinese Premier Wen Jiabao on the sidelines of the Boao Forum on China's southern Hainan Island on Saturday.
Under the plan, the Chinese government will also facilitate borrowing by Hong Kong enterprises and they will be allowed to use their assets in Hong Kong as collateral in securing loans from Hong Kong banks in China.
"We believe that the implementation of this measure under such difficult business environment will help alleviate the financing problem of Hong Kong enterprises on the mainland," the statement said.
Hong Kong, a former British colony, returned to Chinese rule in 1997. Since then, Beijing has done much to bolster Hong Kong's economy particularly in times of trouble.
(Reporting by Tan Ee Lyn; Editing by Sanjeev Miglani)
