BEIJING — The Chinese government should enhance Hong Kong's role as an offshore yuan center over the next five years.

The call came from lawmakers and political advisers at the ongoing sessions of the National People's Congress (NPC) and Chinese People's Political Consultative Conference (CPPCC) in Beijing.

Fang Fang, vice-chairman of JP Morgan Asia Investment Banking, in proposing that Hong Kong be developed into an offshore yuan center, said this would promote the mainland's efforts to globalize the currency.

Hong Kong enjoys "unique advantages in renminbi deposits and flows such as trade and investment," said Fang, who is a member of the CPPCC – the country's top political advisory body.

To make HK an offshore yuan center, Beijing should open up yuan capital accounts gradually to allow mainland residents and corporations to invest in bonds, stocks and other yuan-denominated financial products in Hong Kong, added Fang.

"This will help develop a larger pool of offshore renminbi funds for trade and investment activities," said Fang, who is also the CEO and marketing director of JP Morgan China.

Fang also proposed to allow Hong Kong investors to invest in the mainland’s stock and fixed-income markets using the yuan.

Liu Peiqiong, a deputy to the National People's Congress (NPC) - China's top legislature, backs the proposal to build Hong Kong into an offshore renminbi center.

He said that could increase the cross-border trade settlement, and the government could issue the bonds in yuan, giving the currency a bigger role in the international monetary system.

Li Lihui, president of the Bank of China, said Hong Kong becoming an offshore yuan center would matter a lot to its status as a global finance center.

Since Hong Kong is the springboard for many mainland companies to go global and overseas businesses to the mainland, its possible status as the yuan center will benefit Hong Kong as well as companies at home and abroad, Li said on the sidelines of the ongoing NPC session.

In January, Professor KC Chan, Hong Kong's secretary for financial services and the treasury, was reported to have said yuan bonds issued in 2010 exceeded 30 billion yuan (3.27 billion euros).

Issuers included local and multinational firms as well as international financial institutions such as the Asian Development Bank, Chan said.

The Hong Kong Monetary Authority, the city's de facto central bank, said yuan deposits in the city grew 17.7 percent month-on-month to 370.6 billion yuan at the end of January.

The total renminbi remittance for cross-border trade settlement through Hong Kong increased to 108 billion yuan in January 2011 from 100.9 billion yuan in December 2010.

The trigger was the steep growth of Hong Kong's yuan deposit base as account holders stepped up their bets on yuan appreciation in the last quarter of 2010.

The yuan is expected to undergo gradual appreciation. As the People's Bank Of China has just re-engineered the currency exchange rate flexibility, Fang forecast a gradual 5 percent appreciation in the yuan-dollar exchange rate in 2011.

"Given rising global commodity prices and imported inflationary pressure, one effective way to contain import inflation and improve trade structure is allowing the yuan to appreciate," Fang said.

"But this process alone cannot benefit the offshore yuan market; it must combine with the internationalization of the yuan."