HKMA and PBoC Unveil New Measures to Enhance Financial Ties with Mainland China

The Hong Kong Monetary Authority (HKMA) and the People’s Bank of China (PBoC) have unveiled a series of strategic measures aimed at strengthening the financial connectivity between Hong Kong and Mainland China. These initiatives are designed to consolidate Hong Kong's position as a leading offshore Renminbi (RMB) business hub, according to the Hong Kong Monetary Authority.

RMB Trade Financing Liquidity Facility

The HKMA is set to launch a RMB Trade Financing Liquidity Facility, designed to provide banks in Hong Kong with a stable and cost-effective source of RMB funds. Valued at RMB100 billion, the facility will offer one-month, three-month, and six-month RMB funding with interest rates based on onshore rates plus a spread. This initiative aims to enhance liquidity in Hong Kong’s offshore RMB market and support the growing demand for RMB trade financing.

Enhancements to Bond Connect

Building on the successful operation of the Southbound Bond Connect, the HKMA and PBoC are implementing enhancements including extended settlement times under Central Securities Depositories (CSDs) linkage and support for multi-currency bond settlements. These measures are expected to broaden investment channels for Mainland investors and improve the efficiency of transactions and settlements.

Offshore RMB Repurchase Agreements

The HKMA is also advancing the offshore RMB repo market by utilizing Northbound Bond Connect bonds as collateral. This development is part of a broader effort to create a market-based arrangement for managing offshore RMB liquidity, enhancing Hong Kong’s competitiveness as an RMB business hub.

Cross-Boundary Payment Systems

In a move to facilitate cross-boundary payments, the HKMA and PBoC are working on linking the Mainland's Internet Banking Payment System with Hong Kong's Faster Payment System. This integration aims to enable real-time, small-value remittances between residents of the two regions, enhancing economic cooperation and exchange.

Greater Bay Area Financial Facilitation

The HKMA has expressed support for the PBoC’s initiative to include more participating banks offering account opening services for Hong Kong residents in the Greater Bay Area. This effort is expected to improve the quality and convenience of payment services for Hong Kong residents in Mainland China.

These measures reflect a continued commitment by financial authorities in both regions to promote a closer financial integration and enhance the global standing of Hong Kong as a pivotal RMB hub.