China’s central bank has unveiled a series of new measures to expand the Bond Connect program linking the Chinese mainland and Hong Kong, allowing domestic non-bank financial institutions to participate — a major move to strengthen the special administrative region’s role as a global offshore renminbi hub.

The measures were unveiled on Tuesday at a summit marking the 8th anniversary of the mutual market access scheme. In the first five months of this year, the program’s average daily turnover reached nearly 47 billion yuan ($6.55 billion), marking a 30-fold increase since its launch in 2017, according to Hong Kong Exchanges and Clearing (HKEX).

One of the most significant measures, starting from Tuesday, is that eligible participants in the program’s southbound leg will include four types of non-bank financial institutions – securities firms, funds, insurers and wealth management institutions.

READ MORE: Bond Connect sees international holdings grow fivefold in 8 years

This move is part of the central government’s efforts to deepen financial exchanges with the HKSAR and support the development of offshore RMB market, said Jiang Huifen, deputy director-general of the People's Bank of China (PBOC)’s Financial Market Department, at the event.

Eddie Yue Wai-man, chief executive of Hong Kong Monetary Authority (HKMA), said the expansion will open up more outward channels to fulfill the growing demand of Chinese mainland investors, and address their needs for diversifying their asset allocation.

“It will also boost the development of Hong Kong’s stock market by widening the investor base and enhancing market liquidity, hence increasing Hong Kong’s attractiveness to both fund issuers and global investors,” Yue added.

Other new measures include a plan to enhance the offshore repurchase business under the program by lifting restrictions on the reuse of collateral, and to expand the range of tradable currencies beyond the renminbi to include multiple currencies, such as the US dollar, euro and Hong Kong dollar. Jiang said the measures are expected to make it easier for investors outside the mainland to manage liquidity.

Julia Leung Fung-yee, CEO of Hong Kong’s Securities and Futures Commission (SFC), said these measures will give new impetus to the development of the Bond Connect, and further facilitate overseas investors' access to liquidity support, enhancing the SAR’s competitiveness as a global offshore renminbi hub.

She stressed that Hong Kong must seize the opportunities to strengthen the renminbi’s internationalization as global investors increasingly reallocate assets to diversify risks amid uncertainties, adding that the commission will further accelerate the growth of the renminbi fixed-income market this year.

Launched in 2017, the Bond Connect program leverages Hong Kong’s well-developed financial system to offer overseas investors access to the mainland bond market. It was upgraded in 2021 to allow mainland institutional investors to invest in offshore bonds.

As of the end of May, the mainland interbank bond market had attracted 1,169 offshore investors, including 835 who entered through the Bond Connect and involved 4,099 trading accounts — 213 more than the previous year, according to the Bond Connect Company Ltd, the program’s management entity.

Zhang Yi, the company’s chairperson, said the size of investment in Chinese bonds by overseas institutions has risen from less than 1 trillion yuan to about 4.5 trillion yuan, and the inclusion of renminbi bonds into the world’s major bond indices in recent years has demonstrated global investors’ recognition of China’s bond market.

READ MORE: Southbound Bond Connect to add non-bank financial institutions

With the supporting systems and risk management tools under the Bond Connect continuing to improve in recent years, the program has provided an efficient, transparent and secure market environment for investors to participate in onshore renminbi bond investment in the long run, added Zhang, who is also the president of the China Foreign Exchange Trade System (National Interbank Funding Center).

HKEX CEO Bonnie Chan Yi-ting believes there is a “huge amount of room” for offshore investment growth, as international investors currently hold only about 3 percent of the mainland bond market.

“With global investors increasingly seeking diversification, there was a huge opportunity for that growth to happen in the coming years. And with unique connect channels such as Bond Connect, this is where global investors will get the best access to China's growth opportunities,” Chan said.

Contact the writers at gabylin@chinadailyhk.com