The Hong Kong Monetary Authority (HKMA) has announced a series of new initiatives aimed at deepening financial market cooperation between Hong Kong and Mainland China. These measures are designed to support the development of Hong Kong's fixed income and currency markets, as well as the construction of the offshore renminbi (RMB) market, thereby reinforcing Hong Kong's status as an international financial center.
The specific measures include the following key actions. First, there is a welcome for financial infrastructure institutions from both sides to collaborate on building a Hong Kong fixed income and currency electronic trading platform. Second, arrangements for the Bond Connect Southbound Trading Link will be further optimized and expanded. This includes increasing the annual net investment quota for the Southbound Link, incorporating Southbound bonds into the repurchase support scope, extending the product range to include Hong Kong dollar and RMB bond-related products, and extending its reach to the Macau bond market. The HKMA will also further optimize the market maker management for the Southbound Link.
Third, support will be provided for overseas investors to use onshore government bonds and policy financial bonds held via the Bond Connect Northbound Trading Link as performance collateral at the Hong Kong Futures Exchange Clearing House and the Options Clearing House of the Stock Exchange. Fourth, arrangements for the Bond Connect Northbound Link will be optimized by extending settlement times to further enhance operational efficiency. Fifth, the Swap Connect arrangement will be enhanced by adding the 7-day interbank repo fixing rate (FDR007) as one of its reference rates. Sixth, support will be given to the Hong Kong Exchanges and Clearing Limited for the official launch of a 5-year offshore RMB government bond futures contract on August 3rd of this year.
In addition to these, the HKMA has announced five recent measures it is actively advancing to support offshore RMB market development. These aim to consolidate Hong Kong's leading position as an offshore RMB business hub, enhance its radiating capacity, and better serve the real economy. These measures benefit from the strong support of the People's Bank of China and respond to industry suggestions for promoting offshore RMB market growth.
The specific recent measures are as follows. First, the HKMA's RMB business funding arrangement will be expanded and optimized. The total quota will be increased from the current RMB 200 billion to RMB 500 billion starting July 10th, with the addition of 9-month, 2-year, and 3-year tenors. Second, research will be conducted on launching a 7-day offshore RMB liquidity tender mechanism. Third, the feasibility of issuing offshore RMB short-term debt instruments will be studied to further improve the offshore RMB interest rate curve. Fourth, efforts will be made to advance the establishment of a bilateral currency trading framework for offshore RMB and the Indonesian Rupiah. Fifth, good practices for promoting RMB usage will be shared with the banking industry.
HKMA Chief Executive Eddie Yue stated, "We are pleased to announce this series of measures to further deepen financial cooperation and market connectivity between the two sides, promote the development of Hong Kong's fixed income and currency markets, and consolidate and enhance Hong Kong's position as an offshore RMB business hub and international financial center. The announcement of these related measures relies on the joint efforts of the HKMA, the People's Bank of China, and other relevant financial regulatory authorities from both sides over the past period. We will continue to work closely with relevant departments, the industry, and financial infrastructure institutions to ensure the smooth and prompt implementation of all measures and to explore other further optimization measures."