The Hong Kong Monetary Authority (HKMA) and the People’s Bank of China (PBoC) have announced a series of strategic measures to strengthen financial links between Hong Kong and mainland China. According to the Hong Kong Monetary Authority, the plan is designed to strengthen Hong Kong’s position as a leading offshore yuan (RMB) business hub.
Yuan Trade Finance Liquidity Facility
The HKMA will launch a RMB trade finance liquidity facility designed to provide Hong Kong banks with a stable and cost-effective source of RMB funds. The facility, valued at RMB100 billion, will provide one-, three- and six-month RMB funding at an interest rate equal to the domestic interest rate plus a spread. The goal of the plan is to strengthen the liquidity of Hong Kong’s offshore RMB market and support the growing demand for RMB trade finance.
Bond Connect improvements
Building on the successful operation of Southbound Bond Connect, the HKMA and PBoC are implementing improvements such as extending settlement times through Central Depository (CSD) linkage and supporting multi-currency bond settlement. These measures are expected to expand investment channels for mainland investors and improve the efficiency of trading and settlement.
Offshore Yuan repurchase agreement
HKMA is also developing an offshore RMB repo market using Northbound Bond Connect bonds as collateral. These developments are part of broader efforts to establish a market-based mechanism for managing offshore RMB liquidity and strengthen Hong Kong’s competitiveness as a RMB business hub.
cross border payment system
In a move to facilitate cross-border payments, the HKMA and PBoC are working to link the mainland’s internet banking payment system with Hong Kong’s Faster Payment System. This integration aims to promote economic cooperation and exchange by enabling real-time small remittances between residents of the two regions.
Greater Bay Area Financial Promotion
The HKMA expressed support for the PBoC’s plan to include more participating banks providing account opening services for Hong Kong residents in the Greater Bay Area. These efforts are expected to improve the quality and convenience of payment services for Hong Kong residents living in mainland China.
These measures reflect the continued commitment of both regional financial authorities to promote closer financial integration and strengthen Hong Kong’s global position as a pivotal RMB hub.
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