China to let 3.8 trillion yuan social security fund tap offshore bonds via Bond Connect: Bloomberg

China plans to allow its roughly 3.8 trillion yuan social security fund to purchase offshore bonds via the mutual market access channel with Hong Kong, further boosting demand for yuan-denominated assets in the Asian financial hub, Bloomberg reported, citing sources.

Under the plan, the National Social Security Fund will be able to buy offshore bonds through Southbound Bond Connect without having to apply for outbound investment quotas from Chinese regulators, streamlining the fund’s investment process and providing a new channel to access Hong Kong's bond market, the news agency said. 

The National Council for Social Security Fund, which manages the fund, is currently drafting plans to invest in dim sum bonds, or offshore yuan bonds, through external asset management firms, the report said.

This marks China’s latest move to support the development of Hong Kong’s fixed-income and foreign-exchange markets while promoting broader global adoption of the Chinese currency.

With onshore bond yields hovering near historic lows, mainland investors have increasingly looked abroad for higher returns, while Chinese enterprises generally remain willing to pay a premium on offshore debt issuance to attract a broader investor base, the report said.

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