Chinese mainland, Hong Kong move to promote financial cooperation, connectivity

BEIJING -- China's central bank and the financial authority of the Hong Kong Special Administrative Region have jointly rolled out new measures to strengthen financial cooperation, which is expected to promote the country's financial opening up and consolidate Hong Kong's role as an international financial center.

The six measures unveiled focus on market connectivity improvement and cross-border capital facilitation between the Chinese mainland and Hong Kong.

Firstly, bonds under the Bond Connect program, which include the renminbi (RMB) treasury bonds and financial bonds issued by policy banks, will be allowed as the eligible collateral for the RMB liquidity arrangement of the Hong Kong Monetary Authority (HKMA), according to the People's Bank of China (PBOC) and the HKMA.

Allowing overseas institutions to use high-quality bonds held under Bond Connect as collateral for open market operations in Hong Kong will further enhance the attractiveness of China's bond market, said John Thang, head of financial markets at Standard Chartered Hong Kong, Taiwan and GBA.

As RMB bonds have high investment and hedging value and stable return, foreign investors have attached great importance to RMB bonds in asset allocation, Thang said.

Secondly, foreign investors are able to more deeply participate in domestic bond repurchase business, which experts believe will help investors better manage liquidity and control capital costs, marking a step forward in the bond market opening.

By the end of 2023, a total of 1,124 overseas institutions from more than 70 countries and regions had entered the Chinese bond market, holding 3.72 trillion yuan (523.58 billion U.S. dollars) of bonds.

Thirdly, detailed rules that were published to improve the Cross-boundary Wealth Management Connect Scheme in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) will also be enhanced.

Launched in 2021, the scheme allows residents of Hong Kong, Macao and nine cities in Guangdong Province to invest directly across the boundary of the designated wealth management products. By the end of 2023, 67 banks and 69,000 investors in the GBA had joined the scheme, with cross-boundary remittances amounting to 12.8 billion yuan.

The new rules include securities brokerages in the scheme, raise the individual quota from 1 million yuan to 3 million yuan, and add RMB deposit products of mainland banks. It will be more convenient for GBA residents to participate in the scheme, with diversified investment channels and more wealth management products.

Fourth, Hong Kong and Macao residents will enjoy favorable policies on home purchase payments in other GBA cities to better meet their housing demand.

Fifth, the Shenzhen-Hong Kong credit investigation cooperation will be expanded to facilitate cross-border financing.

Sixth, the digital RMB pilot will be deepened to better serve Hong Kong and mainland residents and enterprises.

The PBOC and the HKMA will explore digital RMB cooperation in multiple specific areas, including individual small cross-border remittances, payment bar codes in Hong Kong, e-commerce, and tuition payment.

Analysts believe the new measures show China's commitment to opening up and will promote mainland-Hong Kong financial cooperation and connectivity, as well as consolidate and improve Hong Kong's role as an international financial center.

Xuan Changneng, vice governor of the PBOC, said the central bank will work closely with Hong Kong financial authorities to expand cooperation and promote the further development of Hong Kong as an international financial center.