PBOC raises Southbound Bond Connect annual investment quota to 800 billion yuan

People's Bank of China Governor Pan Gongsheng announced on Tuesday that increasing the Southbound Bond Connect trading scheme's quota will boost financial cooperation in the Guangdong-Hong Kong-Macau Greater Bay Area.

Pan said the annual investment quota will rise from 500 billion yuan (HK$577 billion) to 800 billion yuan. Southbound Connect bonds will also be included in the scope of repurchase support, he added, with the product range expanded to cover Hong Kong dollar bonds and yuan bond-related products, and extended to Macau’s bond market.

Speaking at the Hong Kong FIC & Bond Connect Summit, Pan said the scope of offshore yuan bonds eligible as collateral in the offshore market will be expanded to enrich yuan value preservation, hedging, and investment product lines. He also expressed support for Hong Kong in building a comprehensive financial trading platform. 

He said the China Foreign Exchange Trade System will work with the Hong Kong Monetary Authority and the Hong Kong Securities and Futures Commission to support the upgrade of the Bond Connect company into an operating entity of a trading platform, becoming an important financial market infrastructure in Hong Kong that provides trading infrastructure services for bonds, currencies, foreign exchange, and other financial markets.

Looking ahead, Pan said the authorities will support Hong Kong in building a diversified financial market system aligned with market demand and strengthening its functions as an international asset management and wealth management center. This includes the upcoming launch of five-year offshore yuan government bond futures to facilitate risk management in the offshore market.

Pan noted that the issuance of Chinese government bonds and high-quality bonds in Hong Kong has increased significantly. Many sovereign governments and enterprises have issued dim sum bonds in Hong Kong, strongly driving the development of Hong Kong’s bond market. 

Amid global interest-rate and inflation volatility, Pan said Chinese bonds offer relative stability and lower volatility, attracting international investors to allocate to them. Coupled with relatively low yuan financing costs, he believes the Hong Kong yuan bond market faces rare development opportunities and will attract more international enterprises to raise funds.

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