Central govt eyes mainland- HK bond link

Connection would supply market with new funding source

The Chinese central government is considering setting up debt market links between the mainland and Hong Kong this year, as it bolsters support for the economy of Hong Kong, Premier Li Keqiang said on Wednesday.

This year, we are considering for the first time establishing a bond market connect between the mainland and Hong Kong, allowing foreign capital to buy mainland bonds from overseas, and Hong Kong will be the first to benefit from such an arrangement, Li said.

“This will help Hong Kong maintain its status as an international financial center and provide Hong Kong residents more investment channels,” he told a news conference at the close of the annual session of the National People’s Congress.

He added that cooperation over the bond market was “what the country needs.”

Hong Kong Exchanges and Clearing Limited ( HKEX) welcomed Li’s announcement.

HKEX believes that bond connect represents “a major breakthrough” in the development of the mainland capital markets and “further strengthens the role of Hong Kong as a gateway between the mainland and international markets,” according to a statement the HKEX released on Wednesday.

HKEX is progressing with the preparatory work for the bond connect program under the guidance of the mainland and Hong Kong authorities.

“A further announcement will be made by the relevant parties in due course,” HKEX said.

Mainland and Hong Kong equity mar- kets have been linked through a “stock connect” scheme that allows foreigners to access mainland shares through the Hong Kong exchange, and mainlanders to access Hong Kong shares through the Shanghai and Shenzhen exchanges.

Exchanges on the two sides have been working on a similar arrangement for bonds, as the central government looks for ways to further open its capital markets and attract foreign investment.

China has gradually opened its bond market to foreign investment and redoubled efforts to lure foreign capital, but investors have said market accessibility and concerns about the stability of the yuan currency – and capital controls enacted to protect it – could impede inflows.