HONG KONG (REUTERS) - A government body called on Hong Kong's regulators on Monday to step up reforms to maintain the city's competitive edge as a premier offshore yuan hub and a global financial centre.

The Financial Services Development Council (FSDC) set out various areas to promote the city's role in the growing offshore yuan business as it faces stiff competition from other cities in a document titled "Proposals to advance the development of Hong Kong as an offshore renminbi (yuan) centre."

While Hong Kong has been at the forefront of the expanding offshore yuan business since mid-2009, the rapid rise of global cities such as London and Singapore along with the homegrown challenges of Shanghai and Qianhai next door, have raised concerns over the city's competitiveness in the long term.

Indeed, the yuan in Hong Kong as a proportion of total yuan in the offshore market declined to around 65 per cent by September 2013 from a peak of nearly 90 per cent in December 2011, indicating the sharp growth of yuan business in other cities.

"The report recognises that Hong Kong is facing challenges arising from evolving global macroeconomic forces and emerging local threats, and that Hong Kong's leading position as an international financial centre is not entirely secure unless we work relentlessly to advance our competitiveness," Ms Laura Cha, chairman of the Financial Services Development Council, said.

The release of the report assumes significance as it comes after China's authorities unveiled ambitious plans to reform the economy and set it on a path of sustainable growth Despite the rise of other offshore cities, Hong Kong remains China's top offshore yuan hub by far. Offshore yuan deposits, including certificate of deposits, have reached approximately 1 trillion yuan (S$204,68 billion), while the outstanding balance of yuan bonds issued offshore has exceeded 450 billion yuan.

But Hong Kong's first mover advantage no longer gives it a comfortable lead, especially with the rising challenge of Chinese cities eyeing a piece of the international yuan business.

With Shanghai earmarked to become an international financial centre by 2020 and the recently established free trade zone, it indicates that some of the market liberalisation measures may be tested on the mainland than in Hong Kong, a marked change from the past. It also suggests Beijing is willing to let Hong Kong develop its own policies to sustain its first-mover advantage as it prepares to help its own cities capture a share of the offshore yuan business.

"There is a big part in the decision of the third plenum talking about the Shanghai free trade zone, while only a sentence on Hong Kong, which shows that the central government is willing to let Hong Kong develop freely and make the most of its own advantages," said Mr Raymond Yeung, an analyst at ANZ in Hong Kong.

To ensure Hong Kong's first mover advantage, some of the recommended measures include relaxing remittance restrictions on Hong Kong residents for yuan trade, allowing onshore companies to lend yuan to their offshore counterparts and attracting more companies from emerging economies of Brazil and India to issue bonds in Hong Kong's offshore yuan bond market.