HKMA and PBOC Jointly Launch Eleven New Market Connect Measures
N.R. Finch
The HKMA, PBOC and Hong Kong SFC on July 7 jointly announced eleven new mutual-access measures spanning Bond Connect expansion, a doubling of offshore renminbi liquidity and new product launches — widening the pipes and tools for two-way capital flow between Hong Kong and mainland China.
Southbound Bond Connect expansion — how much more can mainland institutions buy offshore?
The annual net investment quota rises, and Southbound bonds now qualify for repo — pledging bonds short-term for cash, then redeeming them at maturity. This means → mainland buyers get a bigger quota *and* can refinance what they buy, boosting capital efficiency in one move.
The eligible product range expands to HKD bonds and RMB-bond-linked products, extending coverage to Macau's bond market. In plain terms = one shelf was open before; now the entire aisle is accessible.
Market-maker management will be tightened. This reflects regulators' recognition that secondary-market liquidity is Southbound's weak link — raising quotas alone is not enough if no one is quoting and matching trades.
Northbound Bond Connect and Swap Connect — what new tools do offshore investors get?
Offshore investors can now use onshore government bonds and policy-bank bonds held via Northbound as collateral at HKFE and SEOCH. This means → bonds previously locked in accounts earning only coupon income can now double as margin, making one asset do two jobs.
Northbound settlement hours are extended. In plain terms = the old window was too tight for cross-timezone operations; the buffer is now wider.
Swap Connect adds FDR007 — the 7-day interbank repo fixing rate — as a reference rate. This signals demand for a pricing benchmark closer to actual funding costs; the previous menu was too narrow for flexible rate-derivative trading.
Offshore RMB liquidity — what does doubling from 200 billion to 500 billion mean?
The RMB Liquidity Facility's total quota rises from RMB 200 billion to RMB 500 billion on July 10, more than doubling, with new 9-month, 2-year and 3-year tenors added. This means → banks can borrow more RMB *and* borrow it for longer, matching the tenor needs of corporate direct investment.
HKMA chief Eddie Yue noted that since launch, bank uptake has risen steadily and offshore RMB funding has already reached corporates in ASEAN, the Middle East and Europe within months. In plain terms = Hong Kong is no longer just an endpoint — it is becoming a global relay hub for renminbi.
The HKMA will also study a 7-day offshore RMB liquidity tender and an offshore RMB short-term debt instrument — the first tackles banks' short-term funding gaps, the second fills the missing short end of the offshore RMB yield curve. Details to follow.
New products and infrastructure — what is notable about the August treasury-bond futures launch?
HKEX will launch 5-year offshore RMB treasury-bond futures on August 3. This means → the offshore market gets its first dedicated futures tool for managing RMB interest-rate risk — hedging or shorting no longer depends solely on OTC derivatives.
On infrastructure, the measures welcome collaboration to build a Hong Kong fixed-income and currency electronic trading platform, consolidating fragmented quoting and matching onto a single system.
Additional steps include a bilateral currency-trading framework for offshore RMB and the Indonesian rupiah, plus sharing best practices on RMB adoption with the banking industry. This reflects a policy intent that extends beyond the Hong Kong–mainland corridor into emerging-market currency networks.
What are the key metrics to watch from this round?
The eleven measures span quotas, products, tenors and infrastructure — among the most comprehensive mutual-access packages in recent years.
Two real tests will determine effectiveness: first, whether mainland institutional investors' offshore allocation demand is genuinely activated — quotas and tools are necessary but not sufficient if institutions choose not to use them; second, whether the short end of the offshore RMB yield curve gains enough depth and market-driven pricing from the new instruments.
Eddie Yue stressed the aim to "ensure smooth implementation as soon as possible and explore further enhancements." In plain terms = this is not a destination but a staged expansion — more moves will follow.
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