【Interconnection】PBOC’s Pan Gongsheng: The annual net investment quota for Bond Connect Southbound will be raised to 800 billion RMB, and the scale of the HKMA RMB business fund arrangement will be increased to 500 billion.

Pan Gongsheng, Governor of the People’s Bank of China, said on Tuesday (the 7th) at the Hong Kong Fixed Income and Currency Summit and the Bond Connect Forum in Hong Kong that the size and scope of Bond Connect Southbound will be expanded. The annual net investment quota for Southbound Trading will be increased from the current RMB 500 billion to RMB 800 billion. Southbound Trading will be included within the scope of repo support, expanding the product range to Hong Kong dollar bond and RMB bond-related products, and extending through to the bond market in Macau.

The country’s foreign exchange reserves will continue to increase the proportion allocated to assets in Hong Kong

Pan Gongsheng said that for more than a year now, the country’s foreign exchange reserves have continued to carry out asset allocation and investment trading in Hong Kong. In the future, the country’s foreign exchange reserves will continue to increase the proportion of asset allocation in Hong Kong, injecting more momentum into the development of Hong Kong’s capital market.

Pan Gongsheng also said that support will be provided for the Hong Kong Monetary Authority to expand the scale of its RMB business funding arrangement from the current RMB 200 billion to RMB 500 billion, extending the usage period to no more than 3 years.

According to information from the Hong Kong Monetary Authority, under the current arrangement, the HKMA may, through an RMB business funding arrangement with a total quota of RMB 200 billion, provide banks with RMB liquidity for periods of 1 month, 3 months, 6 months, and 1 year, with interest rates referencing onshore rates. In addition to transactions using bond-based term repo as collateral, the RMB business funding arrangement also includes currency swap transactions. Banks may choose to swap Hong Kong dollar funds for RMB funds with the HKMA.

In addition, Pan Gongsheng said that support will continue to be provided for more high-quality enterprises to list in Hong Kong and issue bonds there. Efforts will continue to steadily optimize and expand interconnection between the Mainland and Hong Kong in areas such as stocks, bonds, wealth management, and interest rate swaps, and to deepen financial cooperation in the Guangdong-Hong Kong-Macao Greater Bay Area. Hong Kong will soon launch 5-year RMB government bond futures, facilitating risk management in the offshore market.