Renminbi (RMB) business in Hong Kong is of strategic importance to both China's mainland and Hong Kong, and the expansion of RMB business will help reinforce Hong Kong's position as an international financial center, said Hong Kong's Secretary for Financial Services and the Treasury in London on Monday.

Speaking on "Hong Kong - Gateway to the China Opportunity" at the Chatham House Seminar, K C Chan said China had started encouraging the use of RMB overseas and further expansion of RMB business in Hong Kong was expected.

He highlighted a significant milestone in the further development of RMB business in Hong Kong - the launch of the RMB trade settlement pilot scheme in July 2009.

He said the scheme would ultimately help develop Hong Kong into a major offshore center for RMB and Hong Kong was working closely with relevant mainland authorities to explore ways to expand its depth and breadth.

Looking into the future, Chan pointed out that Hong Kong would need a greater selection of RMB investment products.

He believed that the availability of more RMB products would attract a larger variety of market participants and help create the right conditions to increase RMB liquidity in Hong Kong, and this would facilitate Hong Kong to develop into a testing ground and international financial center in RMB business.

Also on Monday, Chan and the United Kingdom (UK) Exchequer Secretary to the Treasury, David Gauke, signed a comprehensive agreement for the avoidance of double taxation (CDTA) between the Hong Kong Special Administrative Region and the UK.

The agreement is the 12th CDTA Hong Kong signed with its trading partners and sets out clearly the allocation of taxing rights between the two jurisdictions and the relief on tax rates on different types of passive income.

It will help investors better assess their potential tax liabilities from cross-border economic activities, foster closer economic and trade links between the two places, and provide added incentives for companies in the UK to do business or invest in Hong Kong, and vice versa.