Connect scheme product enrichment under consideration to boost yuan

Financial watchdogs in the mainland and Hong Kong are considering further enriching product types of the mainland-Hong Kong interest rate swap markets mutual access scheme, in a bid to promote the yuan currency's global status.

The connect scheme launched in May 2023, linking the financial hub with the mainland, helping offshore investors in Chinese bonds hedge the exposure.

A total of 20 mainland dealers and 79 offshore investors had participated in Swap Connect as of the end of April, completing more than 12,000 interest rate swap transactions with an aggregate notional amount of around 6.5 trillion yuan (HK$7.04 trillion).

The improvement includes extending the tenor of interest rate swap contracts to 30 years and rolling the contracts out using the Loan Prime Rate as the reference rate, according to a joint statement published by the People’s Bank of China, the Securities and Futures Commission and the Hong Kong Monetary Authority.

Operators in both markets will implement the measures progressively, the statement said.

STAFF REPORTER