China opens up US$10 trillion bond market in liberalisation

SHANGHAI: China yesterday opened up its US$10 trillion bond market to foreign investors, in the latest liberalisation move by Beijing as it seeks to draw in more fund flows as it battles slowing economic growth.

The new conduit comes via Hong Kong, where ‘qualified investors’ will be able to buy debt in China – the world’s third-largest bond market after the United States and Japan.

Qualified investors include central banks, sovereign wealth funds, and other major financial institutions, according to the People’s Bank of China (PBoC) and the Hong Kong Monetary Authority, who jointly announced the platform on Sunday.

Their statement said the ‘bond connect’ arrangement between the Hong Kong and mainland Chinese markets went into ‘experimental operation’ from Monday.

The announcement came on a weekend in which Hong Kong and China marked the 20th anniversary of Britain’s handover of the southern Chinese financial centre back to Beijing in 1997.

“The bond connect is an important move for the central government to support Hong Kong’s development and promote cooperation between the mainland and Hong Kong,” the PBoC said Monday.

It will “promote Hong Kong’s long-term prosperity and stability and provide a more convenient investment channel for overseas investors. It will also steadily push forward the opening up of China’s financial market”.

The growing Chinese bond market has been virtually out of reach for foreign investors, who currently

The bond connect is an important move for the central government to support Hong Kong’s development and promote cooperation between the mainland and Hong Kong.

hold less than 1.5 per cent of bonds issued in China, according to estimates by Bloomberg.

The new platform mirrors previously established link-ups between the share markets of Hong Kong and mainland China that now allow foreign and Chinese investors to buy shares in the each other’s markets.

Those links give foreigners some access to China-listed shares, while also allowing Chinese firms to buy Hong Kong-traded stocks.

The new bond connect scheme, however, currently only allows foreign investors to buy Chinese debt.

HSBC said it completed its first deal under the new arrangement as underwriter for a bond issue by Agricultural Development Bank of China. — AFP

PBoC

Hong Kong chief executive Carrie Lam, People’s Bank of China deputy governor Pan Gongsheng and Hong Kong Monetary Authority chief executive Norman Chan attend the launching ceremony of Bond Connect at Hong Kong Exchanges in Hong Kong. China yesterday...