The People’s Bank of China has raised the annual investment limit to 800 billion yuan as part of a strategic push to strengthen the Greater Bay Area’s financial infrastructure.
Southbound Bond Connect quota increased to boost GBA ties
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Pan Gongsheng, Governor of the People’s Bank of China, announced a significant expansion to the Southbound Bond Connect trading scheme on Tuesday, signalling a fresh effort to deepen financial integration across the Greater Bay Area. Speaking at the Hong Kong FIC & Bond Connect Summit, Pan confirmed that the annual investment quota will rise from 500 to 800 billion yuan (US$117.7 billion).
Southbound Bond Connect is a cross-border trading scheme launched in September 2021 that allows mainland Chinese institutional investors to buy bonds in Hong Kong and, through Hong Kong’s platform, access global bond markets. It complements the Northbound Bond Connect for overseas investors into China.
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The policy shift includes a broadened product scope, Hong Kong’s Standard newspaper reports. Bonds traded under Southbound Bond Connect will now be eligible for repurchase support, with the offering extended to include Hong Kong dollar bonds and various yuan bond-related products. Additionally, the scheme will be extended to encompass Macao’s bond market.
To support the expansion of Southbound Bond Connect, the China Foreign Exchange Trade System is collaborating with the Hong Kong Monetary Authority and the Securities and Futures Commission. This partnership aims to upgrade the Bond Connect company into a comprehensive operating entity for a trading platform, which will provide essential infrastructure services for bonds, currencies, and foreign exchange markets, the Standard says.
Enhancing Southbound Bond Connect
Looking ahead, authorities have pledged to support Hong Kong in building a diversified financial market system aligned with market demand, reinforcing its role as an international asset management and wealth management centre. As part of this ongoing development, the launch of five-year offshore yuan government bond futures is expected soon to assist with risk management in the offshore market.
Pan noted that the issuance of Chinese government and high-quality bonds in Hong Kong has increased significantly, with many sovereign governments and enterprises issuing ‘dim sum’ bonds in the city.
Amid global interest-rate and inflation volatility, Pan argued that Chinese bonds offer relative stability and lower volatility, which continues to attract international investors. With relatively low yuan financing costs, he said he was confident that the Hong Kong yuan bond market faces rare development opportunities, which will encourage more international enterprises to raise funds.
