A New Measure for Promoting High-level Opening-up of China’s Bond Market and Supporting Development of Hong Kong as an International Financial Center
With the joint efforts of the People's Bank of China (PBOC) and the Hong Kong Monetary Authority (HKMA), the HKMA announced that RMB government bonds and policy financial bonds under the Northbound Bond Connect (hereinafter referred to as Northbound Trading) were included in the list of eligible collateral for its Renminbi Liquidity Arrangement (RMBLA) on January 24, 2024.
In recent years, China has made great progress in the opening-up of its bond market. As of end-2023, a total of 1,124 overseas institutions have entered China’s bond market, covering more than 70 countries and regions. They held a total of RMB3.72 trillion of Chinese bonds, an increase of 340 percent compared with the volume before the launch of Bond Connect.
Previously, the HKMA has included offshore-issued Chinese government bonds and policy financial bonds in the list of eligible collateral for its RMBLA. After years of sound and efficient operation of Bond Connect, the PBOC further supported Hong Kong in expanding the list to include Chinese government bonds and policy financial bonds in the custody of Hong Kong’s Central Moneymarkets Unit (CMU) under the Northbound Trading.
This is the first time the collateral function of domestic bonds has been acknowledged in the offshore market. The move is conducive to promoting and enhancing the willingness of overseas institutions to hold bonds, and thus further enhancing the attractiveness of China’s bond market. It is conducive to laying the foundation for domestic bonds to become globally accepted eligible collateral, and thus promoting RMB internationalization in a stable and prudent manner. It is also conducive to consolidating and upgrading Hong Kong’s position as an international financial center, and thus supporting Hong Kong in better integrating themselves into China’s overall development.
Moving forward, conscientiously following the guidelines of the Central Financial Work Conference and the Central Economic Work Conference, the PBOC will continue to work with all other parties to strike a balance between financial opening-up and security, actively study and explore more application scenarios for RMB bond collateral, and steadily expand the institutional opening-up of China’s bond market in terms of rules, regulations, management and standards.
First, please LoginComment After ~