Hong Kong launches road map to deepen yuan's role, expand financial market

Hong Kong unveiled a blueprint on Thursday for its fixed income and currency markets, including measures to expand offshore yuan products and liquidity to consolidate its role as an international financial hub.

The Roadmap for the Development of Fixed Income and Currency (FIC) Markets, jointly unveiled by the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA), sets out plans to broaden offshore yuan usage and expand cross-border Connect schemes to enhance offshore liquidity and yuan-linked product offerings.

It also proposes widening the investor base for fixed income products to include family offices, investment funds and corporate treasury centres.

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"To position Hong Kong as a global FIC hub and further cement our position as the premier offshore RMB business centre, the HKMA will capitalise on emerging trends, including RMB internationalisation and the digitalisation of the FIC market," HKMA chief executive Eddie Yuen Wai-man said.

SFC CEO Julia Leung Fung-yee added: "We will continue to enhance the liquidity of the secondary market for offshore renminbi fixed-income products, and improve risk management mechanisms."

The Hong Kong Monetary Authority logo at IFC Two in Central, September 26, 2024. Photo: Jonathan Wong alt=The Hong Kong Monetary Authority logo at IFC Two in Central, September 26, 2024. Photo: Jonathan Wong>

Under the road map, Hong Kong financial regulators are expected to support rehypothecation of Northbound Bond Connect bonds obtained in repo transactions, and launch the cross-border repo business and offshore China Government Bond futures in Hong Kong to expand offshore yuan businesses.

Hong Kong's financial regulators would also continue to facilitate the issuance of Chinese government bonds.

"These steps will make it easier for investors to manage their renminbi risk exposures and encourage them to hold renminbi assets over the long term," Leung said.

"Hong Kong's regulators have laid down a robust foundation for the fixed income and currency markets, creating a lasting framework that anchors the city's role in global capital flows," said John Lee Chen-kwok, vice-chairman and co-head of Asia coverage at UBS in Hong Kong.

The road map also places equal emphasis on breaking new ground by developing next-generation electronic trading platforms and enabling the issuance of tokenised fixed income products.

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Lee said the policy focus on leveraging Hong Kong for the internationalisation of the yuan, as well as developing a tokenised marketplace for bonds and other digital assets, stood out.

"By advancing [yuan] internationalisation and pioneering tokenisation initiatives from bonds to stablecoins, they are positioning Hong Kong as a bridge between traditional finance and the digital future."

Hong Kong was set to deepen offshore yuan usage and market liquidity, according to market participants. Photo: Shutterstock Images alt=Hong Kong was set to deepen offshore yuan usage and market liquidity, according to market participants. Photo: Shutterstock Images>

Building on the growing momentum of offshore yuan bonds, or so-called dim sum bonds, and the city's leading role in offshore yuan foreign exchange and interest rate derivatives trading, Hong Kong was set to deepen offshore yuan usage and market liquidity, according to market participants.

"Thanks to the Southbound Bond Connect, Hong Kong is the only market in Asia that links mainland Chinese investors with international issuers," said David Liao, co-chief executive for Asia and the Middle East at HSBC.

From the perspective of mainland investors, investing in bonds in Hong Kong with an international issuer base provides an opportunity to achieve asset diversification, he said.

As of August, dim sum bond issuances had reached 475 billion yuan (US$66.7 billion) and were expected to surpass last year's record of 700 billion yuan.

"To keep this momentum, Hong Kong needs to offer more effective risk management tools, which are key for a healthy and sustainable fixed income market," Liao said.

"New measures such as enhancements in offshore RMB repo, increases in secondary market liquidity and the extension of product suite will not only boost the potential returns for bondholders but also expand Hong Kong's RMB liquidity pool," Liao added.

The daily net trading quota under the northbound Swap Connect will more than double to 45 billion yuan from the current 20 billion, starting October 13, to give overseas investors greater capacity to manage yuan interest-rate risk, according to a statement from the China Foreign Exchange Trade System on Thursday.

It would also establish a dynamic adjustment mechanism for market dealers and a bigger team of Swap Connect dealers.

HSBC's co-CEO for Asia and Middle East David Liao, pictured at HSBC head office in June. Photo: Jonathan Wong alt=HSBC's co-CEO for Asia and Middle East David Liao, pictured at HSBC head office in June. Photo: Jonathan Wong>

"Enhancing the Swap Connect mechanism will further facilitate overseas investors in hedging risks from their onshore assets, helping them manage their portfolios more effectively," said Secretary for Financial Services and the Treasury Christopher Hui Ching-yu.

"We will also work closely with mainland institutions to broaden the range of yuan products available in Hong Kong and press ahead with the launch of offshore treasury bond futures."

Since its launch in May 2023, Swap Connect has emerged as a key channel for offshore investors to hedge exposure and support yuan asset allocation.

As of August, 82 overseas institutions from 15 jurisdictions completed over 15,000 transactions, with the notional principal totalling 8.15 trillion yuan.

Formulated in close consultation with industry stakeholders, the road map would guide policymaking by the SFC and the HKMA in the coming years to support the growth of Hong Kong's capital markets, according to a government statement on Thursday.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved.

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