Bond link-up could debut before July 1: HKEx chief
Hong Kong Exchanges & Clearing (HKEx) Chief Executive Li Xiaojia said on Wednesday that he hoped the muchawaited bond trading link between the Chinese mainland and Hong Kong could be launched before July 1, as a fitting tribute to the 20th anniversary of the handover.
The stock exchange boss told the LME Asia Week conference in Hong Kong that he expected “more details” about the crossborder bond trading system to be disclosed in the coming weeks.
The city’s stock market operator, Li pointed out, is currently joining hands with People’s Bank of China and Hong Kong Monetary Authority to progress with preparatory work on the Bond Connect.
He hoped the program could stand a chance of making a debut before July 1, the big day marking the 20th year of the establishment of the Hong Kong Special Administrative Region. But he reiterated regulatory authorities had the final say in the rollout of the trading scheme, while HKEx has no access to the specific timetable.
Dubbed Bond Connect, the trading platform aims to operate alongside the already existing two cross-boundary Stock Connect programs that make the country’s markets more accessible to offshore investors.
The HKEx chief executive’s remarks are about the latest move to ease access to the world’s third-biggest bond market, as policymakers in the Chinese mainland look to encourage overseas investors to issue onshore and to invest in the domestic market.
In March Premier Li Keqiang set a general timeline for the Bond Connect to the yearend at a news conference in Beijing, after the close of the annual legislative sessions.
“Like China itself, the $9-trillion domestic bond market is too big to ignore. Yet, international investors hold no more than 2 percent of it,” Li said. trillion
“That’s what makes Bond Connect a much-needed push for the nation’s yet-to-beopened debt market.”
Unlike the country’s stock markets that have grown for decades, the opening and development of the onshore bond market is far more recent.
Given the sheer size of China’s debt market and its shorter history of development, the concept of Bond Connect itself stands as a “huge leap forward,” Li noted.
But he also said that was also why the bond trading link was a mammoth project, which called for a massive infrastructure buildup from scratch in order to set up a framework for clearing, custody, execution and settlement operations,
the market value of the Chinese mainland domestic bond market
chief executive of HKEx, makes a speech during the LME Asia Week 2017 at Hong Kong Convention and Exhibition Centre on Wednesday.
and a lengthy construction period.
Li said he believed the mega project would not involve a simple one-off launch, adding that even after rollout, it would require years of modifications to ensure its smooth running.
The Industrial and Commercial Bank of China, the world’s biggest bank by assets, is taking the lead in promoting cooperation among a wide range of international financial institutions in financing projects under the Belt and Road Initiative.
The bank is talking to more than 20 international financial institutions, including commercial lenders, policy banks and multilateral development agencies, to jointly “capture” business opportunities in the countries and regions involved in the initiative, said Zhang Hongli, vice-president of ICBC.
“Many banks want to jump on board and there are many issues that are common to all the banks. So there is a huge desire to work together,” Zhang said in an exclusive interview with China Daily.
“There are discussions among the banks on what they can do as a banking community to capture opportunities offered by the Belt and Road Initiative,” Zhang said, adding that the ICBC is committed to more dialogue and greater cooperation with other financial institutions.
Analysts said the move by ICBC highlighted China’s desire to promote cooperation to expand investment channels and to ensure sustainable financing for projects under the initiative.
Xu Hongcai, deputy chief economist at the China Center for International Economic Exchanges, said forming an alliance of financial institutions for the Belt and Road Initiative would create a resource-sharing platform for the banks and help them diversify project risks.
“Big infrastructure projects often require massive funding and extensive due diligence and risk assess- ment. An alliance among the financial institutions will allow them exchange information and help reduce the negotiation cost and ensure the sustainability of the funding,” Xu said.
Huang Jianhui, a researcher with China Minsheng Bank, said creating a flexible and cooperative financing mechanism for the Belt and Road Initiative would help attract greater investment as it would allow potential investors to see the commercial value and potential returns of the projects.
Many banks want to jump on board and there are many issues that are common to all the banks.” Zhang Hongli, vice-president of ICBC
Zhou Xiaochuan, governor of the People’s Bank of China, said earlier it was necessary to enrich the funding channels and to mobilize market forces and local resources.
That was because government funding would not be sufficient to finance the initiative, which involves massive construction of infrastructure projects and industrial cooperation.
The initiative, proposed by President Xi Jinping in 2013, could draw investments worth as much as $502 billion into countries and regions participating in the initiative over the next five years, Credit Suisse Group AG said in a report.