Mainland China briefing: Southbound trading of the Bond Connect scheme launched

On 15 September 2021, the People’s Bank of China (PBOC) and the Hong Kong Monetary Authority (HKMA) jointly announced that southbound trading of the Bond Connect scheme (Southbound Bond Connect) would be officially launched on 24 September 2021 (the joint announcement is available here).

Bond Connect is an initiative launched in 2017 for mutual bond market access between Hong Kong and Mainland China, and was originally limited to northbound trading under which eligible foreign investors are able to invest in bonds circulated in the China Interbank Bond Market. After the launch of Southbound Bond Connect, Mainland China institutional investors approved by the PBOC will be able to invest in the Hong Kong bond market via the connection between Mainland China and Hong Kong financial infrastructure services institutions.

In light of the launch of Southbound Bond Connect, the PBOC and the HKMA have signed an amended version of the “Memorandum of Understanding between the People’s Bank of China and Hong Kong Monetary Authority on Strengthening Supervisory Cooperation under Bond Connect” (available here) which was originally signed in 2017 when Bond Connect was launched. The implementation rules for Southbound Bond Connect will be specified separately.

It is worth noting that the launch of Southbound Bond Connect follows the launch of Wealth Management Connect relating to the Greater Bay Area on 10 September 2021 (for more details, please refer to our article here). These recent developments of cross-boundary schemes are expected to promote mutual access between the financial markets of Mainland China and Hong Kong: they present enormous opportunities for Hong Kong’s financial industry and reinforce Hong Kong’s status as an international financial centre.