Bond Connect Launch Expands Foreign Access to China’s $9tn Debt Market

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The launch of the long-anticipated Bond Connect scheme between Hong Kong and mainland China will provides foreign investors with improved access to the later’s $9tn strong bond market, as well as accelerate international use of the Renminbi.

 

Bond Connect’s inaugural day of operation was scheduled to coincide with the 20th anniversary the Hong Kong handover, with BNP Paribas, HSBC Holdings and a Bank of China asset management unit completing some of the scheme’s first ever trades on 3 July.

BOCHK Asset Management said that it had purchased government and corporate bonds, as well as subscribed for new debt issued by Agricultural Development Bank of China via the link, while HSBC said that it had overseen its first deal as a market maker.

The move is part of ongoing efforts by Chinese regulators to open up the country’s financial system and capital markets to the rest of the world.

Goldman Sachs sees Bond Connect potentially bringing over $1 trillion in additional global fixed income investments to China’s domestic bond market over the next decade, while London’s Stratton Street expects the scheme to expedite internationalisation of the Chinese yuan.

According to local media reports a total of 20 institutions have obtained approval to act as market makers under Bond Connect, 14 of which are Chinese and the remaining six of foreign provenance.

China Development Bank has also announced that it will issue 20 billion yuan ($2.95 billion) in one-year, three-year and 10-year fixed rate bonds for tender via the link on Monday, with HSBC reportedly acting as one of the underwriters.

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