On 13 January 2025, the HKMA and the People’s Bank of China (“PBoC”) announced new policy measures aimed at deepening financial market connectivity between Hong Kong and the Mainland. These measures also seek to strengthen Hong Kong’s position as the global offshore RMB business hub. The initiatives include:
- Introduction of the HKMA RMB trade financing liquidity facility: the HKMA is introducing an RMB trade financing liquidity facility with a total size of RMB100 billion to provide banks in Hong Kong with stable, lower-cost RMB funds to support trade finance services. The HKMA will provide RMB funds with terms of up to 6 months at onshore interest rates plus a spread, using repo transactions and currency swaps to allow banks to exchange HKD for RMB.
- Further enhancement and expansion of bond connect (southbound): the HKMA and the PBoC will enhance and expand southbound bond connect by extending the settlement time under the Central Securities Depositories (“CSD”) linkage, supporting multi-currency bond settlements through the CSD linkage, and gradually broadening the scope of eligible Mainland investors.
- Offshore RMB repurchase using northbound bond connect bonds as collateral: the HKMA supports developing offshore RMB repurchase business as collateral, with a view to establishing a market-based arrangement for offshore RMB liquidity management that will enhance Hong Kong’s competitiveness as an offshore RMB business hub.
- Inclusion of northbound bond connect bonds as eligible margin collateral at OTC Clearing Hong Kong Limited (“OTCC”): the HKMA, PBoC, and Securities and Futures Commission agreed to allow offshore investors to use specific onshore bonds as margin collateral for derivative transactions at the OTCC, with details forthcoming.
- Cross-boundary payment facilitation: the HKMA and PBoC are collaborating to link faster payment systems in the Mainland and Hong Kong, enabling 24/7 real time and small value cross-boundary remittances.
- GBA financial facilitation: the HKMA welcomes enhancements to the Greater Bay Area Wealth Management Connect Scheme (“WMC Scheme”), namely the inclusion of new participating banks by the PBoC to offer account opening by attestation services, enhancing payment convenience for Hong Kong residents on the Mainland. The WMC Scheme, first launched in September 2021, is a PBoC-led initiative which aims to facilitate cross-boundary investment in wealth management products for residents in the Guangdong-Hong Kong-Macao Greater Bay Area.
For more details about the announcement, please click here.
