China unveiled fresh measures to strengthen Hong Kong's role as an offshore yuan financing hub, including establishing a new yuan funding facility for banks and companies and expanding access to mainland investors to invest in foreign-currency bonds in the city, officials said.
The People's Bank of China (PBOC) and the Hong Kong Monetary Authority (HKMA) will offer a 100 billion yuan (US$13.6 billion) liquidity facility for banks to help their customers obtain yuan funding for one, three and six months to support trade. The cross-border Bond Connect scheme will also be tweaked to deepen the market.
"The prosperity and development of the capital market are at the core and foundation of Hong Kong's status as an international financial centre," PBOC Governor Pan Gongsheng said at the Asian Financial Forum in Hong Kong on Monday. Both sides will work to expand financial market interconnectivity, "including encouraging more high-quality enterprises to list and issue bonds in Hong Kong", he added.
Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.
People's Bank of China Governor Pan Gongsheng, seen during a press briefing in Beijing in September 2024. Photo: Reuters alt=People's Bank of China Governor Pan Gongsheng, seen during a press briefing in Beijing in September 2024. Photo: Reuters>
Pan also highlighted other possible measures to support Hong Kong, including strengthening its role in the Greater Bay Area. He also mentioned about increasing the allocation of China's US$3.2 trillion foreign exchange reserves - or US dollar assets primarily held in the form of US Treasuries and agency bonds, without elaborating.
The new yuan liquidity facility is an upgrade to an existing yuan funding, which only backs financing on overnight basis or over a few days, HKMA CEO Eddie Yue Wai-man said on the sideline of the forum. It will make companies and banks "feel more comfortable" to use yuan to settle trade, he added.
Authorities will extend the settlement time for transactions under Bond Connect from Tuesday, Yue said. Mainland-based investors, currently restricted to investing in yuan-denominated bonds, will be allowed to buy securities priced in other currencies such as the US dollar and euro, he added.
Beijing will also allow more mainland institutional investors such as insurers to trade bonds in Hong Kong, a privilege currently granted only to banks. Yue said this measure will be introduced when authorities in Beijing have finalised the finer details of the plan.