In order to promote the development of the bond markets in Hong Kong and Mainland China, the People’s Bank of China (PBoC) and the Hong Kong Monetary Authority (HKMA) have approved China Foreign Exchange Trade System & National Interbank Funding Centre, China Central Depository & Clearing Co., Ltd, Shanghai Clearing House (together the “Mainland Financial Infrastructure Institutions”), together with Hong Kong Exchanges and Clearing Limited and Central Moneymarkets Unit (together the “Hong Kong Financial Infrastructure Institutions”), to collaborate in establishing mutual bond market access between Hong Kong and Mainland China (Bond Connect). It is hereby announced that:
1.Bond Connect is an arrangement that will enable Mainland and overseas investors to trade bonds tradable in the Mainland and Hong Kong bond markets through connection between the Mainland and Hong Kong Financial Infrastructure Institutions. Northbound Trading will commence first in the initial phase, i.e. overseas investors from Hong Kong and other countries and areas (overseas investors) to invest in the China Interbank Bond Market through mutual access between the Hong Kong and Mainland Financial Infrastructure Institutions in respect of trading, custody, settlement etc. Southbound Trading will be explored in due course, i.e. Mainland investors to invest in the Hong Kong bond market through mutual access between the Financial Infrastructure Institutions of the two places.
2.Bond Connect is an important measure of the Central Government to support Hong Kong’s development and deepen cooperation between Mainland and Hong Kong. It is conducive to the consolidation and enhancement of Hong Kong’s status as an international financial centre, to the steady and progressive opening-up of the Mainland financial markets, to the diversification of investment channels for overseas investors and to the long-term prosperity and stability of Hong Kong.
3.Bond Connect will abide by the relevant laws and regulations of the bond markets of the two places. Northbound Trading will follow the current policy framework for overseas participation in the China Interbank Bond Market and at the same time respect international norms and practices. The scope of eligible investors and products under Northbound Trading will be consistent with the scope specified in the relevant notices promulgated by PBoC. Through the cooperation and connection between the Financial Infrastructure Institutions of the two places, overseas investors can more conveniently invest in the Mainland bond market, allocate renminbi assets and manage associated risks. There will be no investment quota for Northbound Trading.
4.Regulators of the Hong Kong and Mainland bond markets will respectively take all necessary measures to establish, in the interest of investor protection, effective mechanisms under Bond Connect to respond to any misconduct in a timely manner. Regulators of the Hong Kong and Mainland bond markets will enter into a memorandum of understanding on supervisory cooperation to establish effective supervisory cooperation arrangements and liaison mechanisms in order to maintain financial market stability and fair trading.
5.The Hong Kong and Mainland Financial Infrastructure Institutions should actively take forward preparations for Bond Connect in an orderly manner and with prudent risk management. Bond Connect will be formally launched after relevant rules and system development have been finalised, market participants’ practical needs have been suitably addressed, relevant regulatory approvals have been granted and all other necessary preparations have been completed.
The date of formal launch of Bond Connect will be separately announced.
May 16, 2017
