Hong Kong should let investors trade constituent stocks of the Hang Seng Index in renminbi, a financial policy heavyweight has suggested, an idea the government says it is “absolutely open” to considering.

The proposal was made by the former head of the Hong Kong Monetary Authority, Joseph Yam Chi-kwong, at a briefing that Beijing officials led on Monday about how the city could better align its policies with goals laid down in the latest national five-year plan.

Allowing investors to quote and settle the index’s 50 constituent stocks in renminbi would be “a giant step” in advancing the internationalisation of the currency, a goal laid down in the plan, argued Yam, now a key adviser to the city’s leader.

“[It should be] up to investors to decide what currencies they use, when to use it, whether they are buying or selling,” he told the media after the seminar. “If implemented, this could be a giant step for the internationalisation of renminbi.”

Joseph Yam, Executive Council member, meets the press on Monday.

The permanent secretary for financial services and the treasury, Salina Yan Mei-mei, said the bureau was receptive to the idea.

“Market acceptance and regulatory mechanisms should be taken into consideration, but we are absolutely open to proposals that allow more financial products to be traded in renminbi,” she said at a separate press event.

Yan pointed to the first real estate investment trust listed in Hong Kong, Hui Xian in 2011, and said “similar mechanisms” could be established in the future.

A leading policy expert at the People’s Bank of China told the seminar that the financial hub, home to the largest pool of offshore yuan deposits, enjoyed “the best conditions” to offer tailor-made renminbi products for global markets.

“If leveraging the mainland while engaging the world are the genes of Hong Kong’s long-term prosperity and stability, then the renminbi is the ‘blood vessel’,” said Zhou Chengjun, the director of banks Finance Research Institute.

Zhou also revealed that the southbound leg of the Bond Connect programme would be implemented “relatively sooner” compared with other schemes, but he did not disclose the exact schedule.

The link allows investors from mainland China and overseas to trade in each other’s respective bond markets, but after four years of operation access remains restricted to only flowing north.

Yam, who led the city’s de facto central bank from 1993 to 2009, said he was not worried his proposal would undermine the status of the local currency, which is pegged to the United States dollar.

“I am quite sure that many investors are willing to take risks of the renminbi when trading the China Concepts stocks,” he said, referring to Chinese companies whose business is rooted on the mainland but are incorporated overseas and listed in the US.

But some economists cast doubt on the wisdom of Yam’s idea, warning the move might increase currency and asset risks, or worsen market fluctuations.

“The move will complicate the stock market operation as authorities need to set up a very accurate and effective exchange rate mechanism for conversion between the renminbi and Hong Kong dollar,” said Simon Lee Siu-po, co-director of the international business and Chinese enterprise programme at Chinese University. “A small difference in the exchange rate might create a lot of currency risks. I am afraid this will attract a lot of speculative activities and provoke market fluctuations.”

Carie Li Ruofan, an economist at OCBC Wing Hang Bank, also questioned the need for the move and its feasibility.

“I doubt if there is sufficient infrastructure to support the use of renminbi to buy stocks in Hong Kong, such as for calculating the exchange rate of that currency,” she said.

Li argued Hong Kong had other avenues available to increase cross-border flow of renminbi and liquidity of deposits, such as the southbound leg of the Bond Connect scheme.

Companies making up the Hang Seng Index have a combined market capitalisation of HK$46.6 trillion (US$5.98 trillion), and average a daily turnover of HK$184.3 billion. By comparison, firms listed on Shanghai’s stock market have a market capitalisation of HK$54 trillion, with daily turnover at HK$88.2 billion.

Yam, who rarely addresses the media at government events, also commented on Friday’s surprise decision by China’s top legislative body to wait before applying the national anti-sanctions law to Hong Kong.

The localisation of the law has sparked fear among businesses and banking giants that they could find themselves legally obliged to adhere to competing sanctions requirements by China and the US.

Taking more time to assess the impact of the legislation on the city’s financial system was only prudent given the issues were “complicated”, he said.

“Those being sanctioned by foreign countries, including the chief executive, might choose to make financial institutions less embarrassed by stopping to use their own bank accounts,” he said. “But will foreigners like Americans [hit by the anti-sanction law] make the same concessions? It’s a complicated issue.”

The seminar was held on the first of a four-day visit by a mainland delegation led by Huang Liuquan, a deputy director of the State Council’s Hong Kong and Macau Affairs Office.

Hu Zhaohui, deputy director of the department of development planning at the National Development and Reform Commission, tasked the city leaders to support more competitive mainland companies in listing in Hong Kong, and strengthen the city’s role as an international centre for asset and risk management.