The Financial Services Development Council (FSDC) yesterday proposed the inclusion of mainland pension funds in Southbound Bond Connect as part of a package of policy recommendations for attracting long-term, patient capital to Hong Kong.
Ding Chen, vice chairman of FSDC, said pension funds are more conservative by nature, so their overseas expansion will be slower than insurers. With most assets in fixed-income securities, pension funds have seen attractive yield gaps between offshore and onshore bonds. Driven by portfolio diversification and pursuit of higher returns, they are keen to get regulatory approval to invest in offshore bond products.
The FSDC has seen expanding pools of retirement savings and insurance funds globally and accelerating demand for overseas asset allocation from Chinese mainland pension and insurance funds.
Insurers in the mainland held 41.3 trillion yuan (HK$48.6 trillion) in assets as of the end of 2025, but only 5.4 percent is allocated offshore - well below the 15 percent regulatory ceiling. Meanwhile, the mainland's three-pillar pension system is projected to reach 22-28 trillion by 2030, compared with 15.7 trillion yuan in 2024, FSDC said.
As demographic aging accelerates, cross-border diversification and the need to match future payouts to policyholders and pensioners present a growth frontier for Hong Kong as a global offshore yuan center to bridge international and regional long-term capital, it added.
FSDC also recommended deepening long-dated bonds, strengthening yield curves, developing thematic equity products, exploring Insurance Connect as regulated cross-border bridge and resolving cross-border tax frictions to better channel institutional capital flows.
Frank Feng
