China will support more onshore investors to invest in offshore bonds and expand the scope of the Bond Connect scheme to include non-banking institutions, a senior People's Bank of China official said on Tuesday.
The southbound leg of the Bond Connect scheme, which enables institutions on the Chinese mainland to access Hong Kong's bond market, will open to brokerages, insurers, mutual funds and wealth managers, Jiang Huifen, deputy director-general of the financial market department at the PBOC, said at the programme's anniversary ceremony.
"The southbound and northbound of the Connect will be improved and help investors go abroad through the connection scheme," she said, speaking at the Bond Connect anniversary summit.
The quota under the Swap Connect scheme, which allows international investors to trade and clear onshore yuan interest-rate swaps, will also be increased, Jiang said.
The measures align with Beijing's broader push to enhance the yuan's global appeal while maintaining exchange rate stability amid ongoing trade tensions with the United States.
"We will continue our efforts in the Middle East, South America, Europe...to continue to open the Chinese bond market to these regions as well as to promote RMB bonds as one of the target assets in the global investment portfolio," said Zhang Yi, president of China Foreign Exchange Trade System, at the summit.
Despite a weaker dollar, the yuan has largely stayed flat as policymakers favour stability to support trade talks and economic recovery, traders said.
"In the current volatile, political climate, global capital is looking to diversify, is looking for stability," said Bonnie Chan Yi-ting, chief executive of Hong Kong Exchanges and Clearing (0388).
"Hong Kong is uniquely placed to connect global capital to China opportunities."
The Hong Kong Monetary Authority will soon further expand its offshore Renminbi repo business to support repledging and cross-currency repurchases, said chief executive Eddie Yu Wai-man at the forum.
CMU OmniClear under the HKMA will also improve its operational arrangements accordingly, with the relevant enhancements to be implemented by the end of August, Yue added.
Yue also pointed out that the measure to expand the scope of investors of the Southbound Connect to non-banking institutions such as securities dealers, funds, insurance companies and financial institutions will take effect today.
Securities and Futures Commission chief executive Julia Leung Fung-yee mentioned that the expansion of Bond Connect comes at a timely manner, as global investors are accelerating asset reallocation for risk diversification.
She also mentioned that the securities regulator is working to announce details about adding a yuan-settled counter into the Stock Connect in the near future.
Chinese investors held 561 billion yuan (HK$614 billion) worth of bonds in Hong Kong, accounting for a small portion of the city's overall bond market of around US$1 trillion (HK$7.8 trillion), at the end of January, brokerage Guotai Junan said in a research note.
REUTERS AND STAFF REPORTER
