Bond Connect to expand further

China's central bank has unveiled a series of new measures to expand the Bond Connect program linking the country's interbank bond market with global markets via Hong Kong, allowing more onshore institutional investors to participate — a major move designed to strengthen the special administrative region's role as a global offshore renminbi hub.

The measures were unveiled on Tuesday at a summit marking the 8th anniversary of the mutual market access scheme. In the first five months of this year, the program's average daily turnover reached nearly 47 billion yuan ($6.55 billion), marking a 30-fold increase since its launch in 2017, according to Hong Kong Exchanges and Clearing.

One of the most significant measures, starting from Tuesday, is that eligible participants in the program's southbound leg will include four types of non-bank financial institutions: securities firms, fund managers, insurers and wealth management institutions.

This move is part of the central government's efforts to deepen financial exchanges with the HKSAR and support the development of the offshore renminbi market, said Jiang Huifen, deputy director-general of the Financial Market Department of the People's Bank of China, at the event.

Jiang said the bank will continue to strengthen collaboration with Hong Kong while steadfastly advancing the high-standard opening-up of China's financial market, supporting the development of the SAR as an international financial center.

Eddie Yue Wai-man, chief executive of the Hong Kong Monetary Authority, said the expansion will open up more outward channels to fulfill the growing demand of Chinese mainland investors, and address their needs for diversifying their asset allocation.

Other new measures include a plan to enhance the offshore repurchase business under the program by lifting restrictions on the reuse of collateral, and to broaden the range of tradable currencies beyond the renminbi to include multiple currencies.

Julia Leung Fung-yee, CEO of Hong Kong's Securities and Futures Commission, said these measures will give new impetus to the development of the Bond Connect and further facilitate overseas investors' access to liquidity support, enhancing the SAR's competitiveness as a global offshore renminbi hub.

The Bond Connect leverages Hong Kong's financial system to offer overseas investors access to the mainland bond market. It was upgraded in 2021 to also allow mainland institutions to invest in offshore bonds.

As of the end of May, the mainland interbank bond market had attracted 1,169 offshore investors, including 835 who entered through the program, according to Bond Connect Co Ltd, the program's management entity.

Zhang Yi, the company's chairperson, said the size of investment in Chinese bonds by overseas institutions has risen since the program's launch from less than 1 trillion yuan to about 4.5 trillion yuan.

With the supporting systems and risk management tools under the Bond Connect continuing to improve in recent years, the program has provided an efficient, transparent and secure market environment for investors to participate in long-term onshore renminbi investment, she added.