Government seeks to beef up Hong Kong’s role as Asia’s bond hub by accelerating Bond Connect, increasing use of green bonds

In his latest budget, Financial Secretary Paul Chan Mo-po proposes doubling the ceiling on the sovereign green bond programme to HK$200 billion

He also unveiled plans to expedite a cross-border investment channel that will enhance access to mainland China’s vast bond market

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Booklets explaining Silver Bonds. The government wants to raise the borrowing limit of the its retail bond programme to HK$300 billion from HK$200 billion. Photo: Felix Wong

Published: 7:59pm, 24 Feb 2021Updated: 1:11pm, 21 May 2021

Hong Kong’s government is looking to tap China’s US$15 trillion bond market for growth, as it proposed creating a trans-border investment channel that can turn the city into a regional centre for trading fixed-income financial products. It also unveiled plans to raise the ceiling on its own fundraising via bond sales.

In his 2020-21 budget speech, Financial Secretary Paul Chan Mo-po announced a range of measures to bolster the development of Hong Kong’s bond market, which the government said currently ranks third in Asia ex-Japan in terms of the total amount raised. The move comes just as the government has raised the stamp duty on stocks.

It forms part of the government’s drive to stimulate the city’s economy, which shrank 6.1 per cent last year, its biggest annual contraction on record, as the coronavirus pandemic brought activity to a halt and crippled businesses.

The government proposes doubling the borrowing ceiling of its green bond programme to HK$200 billion to allow it to issue a further HK$175.5 billion of the environmentally friendly bonds within the next five years.

Chan warned, however, that the plan to raise more funds this way will hinge on prevailing market conditions.

“We plan to issue green bonds regularly and expand the scale of the government green bond programme,” he said.

Green bonds are fixed-income products designed to fund projects that are environmentally friendly. In a bid to develop as an international green finance hub and combat climate change, the financial secretary first announced the government green bond programme in the 2018-19 budget.

Just last month, the government completed the sale of a second batch of green bonds totalling US$2.5 billion.