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Beijing unveils policy enhancements to give ‘vitality’ to Hong Kong markets

The governor of China’s central bank says Beijing is set to increase capital allocation to the city to 800 billion yuan under the Bond Connect scheme

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Pan Gongsheng, governor of the People’s Bank of China gives a keynote speech at Hong Kong FIC & Bond Connect Summit in Admiralty. Photo: Sun Yueng
Enoch YiuandDaisy Wu

Mainland China’s foreign reserves would continue to increase asset allocation in Hong Kong, providing further momentum to the city’s capital market development, the governor of the People’s Bank of China (PBOC) said on Tuesday.

Speaking at the Hong Kong FIC & Bond Connect Summit, Pan Gongsheng unveiled several substantial policy enhancements, including a 60 per cent hike in the investment quota for Bond Connect’s southbound segment, alongside measures to expand investment channels and diversify eligible products.

“This will give vitality to Hong Kong,” Pan said.

As a core measure to strengthen cross-border financial ties, Pan announced that the annual net investment quota under the Bond Connect scheme would be increased to 800 billion yuan (US$117.82 billion) from the current 500 billion yuan.

The programme would also expand the number of eligible products to include Hong Kong dollar bonds and related yuan-denominated assets, with the scope extended to cover Macau’s bond market.

Building on an initiative introduced early last year, Pan noted that the state’s foreign exchange reserve had been actively deployed in Hong Kong for asset allocation and investment trading. The strategic development would continue to scale up, he said.
Amid heightened global interest rate and inflation volatility, Pan noted that Chinese bonds offered a “unique diversification configuration” that continued to attract international investors due to their relative stability. Coupled with lower yuan financing costs, this presented a prime window to attract more sovereign and international corporate issuers to Hong Kong, he added.
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