China clearing house considers launching 'bond connect' scheme
Mainland clearing house studies possible launch of through train link for onshore and offshore debt markets to give broader foreign access
The mainland's bond clearing house is studying the possibility of launching a scheme linking the onshore and offshore bond markets - similar to the Shanghai-Hong Kong stocks through train - which would give foreign investors broader and freer access to the world's third-largest debt market.
China Government Securities Depository Trust and Clearing, one of the two state-backed clearing houses on the mainland, had expressed interest to regulators and industry groups in Hong Kong in establishing a "bond connect scheme" following November's successful launch of the stocks through train scheme, sources said.
The trust was set up by the People's Bank of China in 1996 to provide bond depository, custody and settlement services for the mainland's interbank bond market. More than 93 per cent of bonds on the mainland are traded in the interbank market, with four in five interbank bond trades cleared and settled through the trust, which had 28.8 trillion yuan (HK$36.3 trillion) worth of outstanding bonds in its custody in November.
Consultations about the framework for a bond trading link began after the trust expressed an interest. The Treasury Markets Association, a group led by Hong Kong Monetary Association deputy chief executive Peter Pang Sing-tong, has submitted a proposal regarding the bond connect initiative, according to a source at a major foreign bank's trading desk.
Separately, the Asia Securities Industry & Financial Markets Association, which represents more than 70 banks, asset managers and law firms, is working on another proposal and plans to lobby the regulators.
Patrick Pang, managing director and head of fixed income and compliance at ASIFMA, said: "After the success of the stock connect scheme, we think that there is room to do more. Bond connection is clearly an important direction."