The author Yang Tao is a researcher with the Institute of Finance and Banking, Chinese Academy of Social Sciences

Earlier this month, the People's Bank of China (the central bank) and the State Development and Reform Commission promulgated provisions involving issuing renminbi bonds in the Hong Kong Special Administrative Region.

Ready to make this major move toward financial reform, China Construction Bank, Bank of China and Import-Export Bank of China published their plans to float renminbi bonds in Hong Kong.

Back in 2003, the Chiangmai (Thailand) Declaration, in the wake of the Asian financial crisis in the late 1990s, urged that regional financial cooperation be reinforced to stave off possible future financial catastrophes. The declaration placed development of the Asian bond market at the core of regional financial integration.

China holds a particularly important place in regional monetary cooperation. But its backward bond market brings uncertainties for the Asian bond market and financial cooperation.

As a result, it is difficult for the country to get involved in overall financial cooperation with other countries.

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However, it is desirable to make the best use of Hong Kong's advantageous position as an international financial center and as a bridge between the Chinese mainland and the rest of the world. Cooperation between the mainland and Hong Kong may offer a channel for China to participate in future Asian financial cooperation.

As a matter of fact, issuing renminbi bonds in Hong Kong was much talked about back in 2004. But at the time, the volume of renminbi circulating in Hong Kong and renminbi deposits in the special administrative region were limited. Moreover, a significant portion of renminbi in Hong Kong was circulating through underground avenues.

All taken, the time was not right for floating renminbi bonds in the special administrative region.

Things are different now.

The channels through which the mainland and Hong Kong conduct financial cooperation are fairly developed and the renminbi deposits in Hong Kong reached 25.5 billion yuan ($3.2 billion) at the end of April.

All this indicates that the time is ripe for floating the renminbi.

Issuing renminbi bonds is of great significance for Hong Kong.

First, Hong Kong's position as an international monetary hub has been challenged since the Asian financial crisis. In addition, the weak local bond market erodes the monetary stability of Hong Kong.

Seizing the opportunity of floating renminbi bonds, Hong Kong is expected to promote a set of monetary facilities covering payment and clearance, which facilitates the development of the local bond market.

In turn, some of its structural defects as an international financial hub will be removed.

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