At a time when geopolitical conflicts continue to roil global markets, the comprehensive package of policy measures announced by People’s Bank of China (PBOC) Governor Pan Gongsheng last week serves not only as a timely catalyst for the development of the Hong Kong Special Administrative Region’s financial sector, but more importantly, as a powerful engine for the city’s economic growth. The 11 measures, which aim at strengthening financial cooperation between the Chinese mainland and the SAR, will help Hong Kong significantly expand its fixed-income and money markets, further consolidating the city’s position as the world’s premier offshore renminbi (RMB) center.
The nation’s 15th Five-Year Plan (2026-30) outlines the strategic vision of building a financial superpower. Under the blueprint of building a national financial powerhouse, Hong Kong acts as an indispensable strategic pivot. As a premier global financial center, it serves as the critical bridge connecting the mainland with global capital markets, underpinned by its free and open market environment, mature legal system, robust financial infrastructure, and deep pool of international talent.
Consequently, enhancing Hong Kong’s financial functions and capabilities is a crucial move in realizing this broader national vision. The new financial cooperation measures serve exactly that purpose.
In participating in the national financial strategy, Hong Kong’s financial sector enjoys multiple advantages and opportunities.
First, in the pursuit of becoming a financial superpower, expanding the country’s say in global resource allocation is of paramount importance. Hong Kong boasts a highly internationalized market ecosystem and a superior rule-of-law environment. When it comes to elevating the nation’s capacity for global asset pricing and capital deployment, Hong Kong is uniquely qualified to shoulder this task.
Second, Hong Kong has consistently been at the vanguard of RMB internationalization. Now, by expanding offshore RMB liquidity, introducing medium- to long-term interest rate hedging tools, and shoring up capacities in cross-border settlement, investment, financing and risk hedging, Hong Kong is ready to complete and optimize the chain of RMB internationalization.
Third, Hong Kong can always count on and leverage the nation’s support in expanding and diversifying its financial services. Finance functions as the lifeblood of the real economy; the larger the economy, the greater its capacity to generate and absorb capital. The mainland’s status as the world’s largest manufacturing powerhouse and the top player in global goods trading provides an unparalleled bedrock for Hong Kong’s financial sector.
The central government’s latest measures to support Hong Kong’s financial development are highly pragmatic initiatives, formulated after a comprehensive assessment of national strategic imperatives, Hong Kong’s specific economic needs, and the evolving dynamics of global competition and landscape. These policies serve as another critical entry point for Hong Kong to integrate into and serve the broader national development framework, unlocking new opportunities for its financial sector
Fourth, against a backdrop of persistent global geopolitical friction, international capital is actively seeking safe havens. Hong Kong is backed by a colossal economy boasting a population of 1.4 billion and an economic output of 140 trillion yuan ($20.64 trillion). This robust sovereign backing serves as a powerful anchor, bolstering the confidence of global institutional investors in Hong Kong’s financial resilience.
While Hong Kong boasts numerous competitive advantages, its structural shortcomings are equally apparent. The financial ecosystem remains heavily skewed toward the equities market, whereas segments such as fixed income, gold, other commodities, and derivatives lag behind. Furthermore, the capacity for adjusting offshore RMB liquidity has been somewhat constrained, coupled with an insufficient supply of risk management tools. The PBOC’s latest supportive measures are meticulously calibrated and highly synergistic, designed to simultaneously rectify these structural deficiencies and amplify existing strengths.
These policies are characterized by four defining features. The first is deepening financial interconnectivity. The PBOC will increase the annual net investment quota for the Southbound Bond Connect from the current 500 billion yuan to 800 billion yuan. Crucially, it will make Southbound bonds eligible for repurchase agreements, expand the product scope to include Hong Kong dollar and RMB-denominated bonds, and extend this connectivity to the Macao bond market. This means mainland institutions can not only deploy more capital to purchase Hong Kong bonds but also leverage these assets for repo financing — a mechanism that significantly boosts liquidity by accelerating capital velocity and enhancing market dynamism.
The second is driving multifaceted diversification. The PBOC’s measures include facilitating the launch of offshore RMB sovereign bond futures in Hong Kong, backing the establishment of a comprehensive financial trading platform, expanding the scope of use of RMB bonds as eligible collaterals in the offshore market, and supporting the development of Hong Kong’s gold market while promoting interconnectivity with the mainland. These initiatives provide the foundational support — laying the groundwork, setting the platform, and building the pipelines — needed to powerfully propel Hong Kong’s financial sector forward.
The third is stabilizing the foundational RMB liquidity base. The PBOC will expand the scale of the Hong Kong Monetary Authority’s (HKMA) dedicated RMB liquidity facility from 200 billion yuan to 500 billion yuan — a 150 percent increase — and extend its maturity to three years. Coupled with the existing 800 billion yuan bilateral currency swap arrangement, the liquidity of offshore RMB in Hong Kong will see a massive enhancement. Another standout policy allows the HKMA to access RMB liquidity from the PBOC through repo transactions using high-grade bonds, including Chinese sovereign debt. In essence, if Hong Kong experiences liquidity tightening, it can leverage its holdings of sovereign bonds to secure RMB from the central bank. The magnitude of this institutional support is unprecedented.
The fourth is attracting foreign capital to Hong Kong by leveraging the allocation of national foreign exchange reserves. The country holds the world’s largest foreign exchange reserves, exceeding $3 trillion. As Pan noted, over the past year, the national foreign exchange reserves have continuously been allocated for investment in Hong Kong assets, and the allocation ratio will continue to increase. This strategic move sends a strong signal to global markets: Hong Kong’s financial fundamentals remain exceptionally solid, systemic risks are highly manageable, and the market offers compelling long-term investment value.
The policy dividends provided by the central government have created a historic opportunity for the transformation and upgrading of Hong Kong’s financial sector. To capitalize on this, Hong Kong must proactively design a new paradigm for its financial ecosystem through five strategic imperatives.
First, fortify the core fixed-income market. By leveraging the expanded Southbound Bond Connect, Hong Kong should actively engage with large mainland institutions — including banks, insurance companies, and mutual funds — to continuously channel fresh capital inflows into the city. The city must also conduct targeted outreach to global sovereign wealth funds and multinational corporations, incentivizing them to issue bonds and raise capital in Hong Kong.
Second, optimize the offshore RMB value chain. By utilizing the liquidity provided by the 500 billion yuan dedicated facility, Hong Kong can effectively lower offshore RMB financing costs and construct a seamless, end-to-end offshore financial value chain.
Third, attract global financial resources. Using the increased allocation of national foreign exchange reserves as a catalyst, Hong Kong should intensify its promotional efforts in global markets to attract international financial headquarters and mega-asset management firms to establish a presence in the city.
Fourth, cultivate a diversified financial ecosystem. This requires accelerating the infrastructure construction for the gold market, aggressively expanding operations in commodities and financial derivatives, and enriching the variety of financial trading instruments available to investors.
Fifth, deepen cross-border and international connectivity. Relying on the established financial interconnectivity mechanisms between Hong Kong and the mainland, the city must promote the sharing of complementary market resources, broaden its global financial cooperation network, and ultimately forge a “two-way gateway” that facilitates both the outflow of mainland capital and the strategic deployment of global capital into the mainland.
The central government’s latest measures to support Hong Kong’s financial development are highly pragmatic initiatives, formulated after a comprehensive assessment of national strategic imperatives, Hong Kong’s specific economic needs, and the evolving dynamics of global competition and landscape. These policies serve as another critical entry point for Hong Kong to integrate into and serve the broader national development framework, unlocking new opportunities for its financial sector.
The author is vice-chairman of the Committee on Liaison with Hong Kong, Macao, Taiwan and Overseas Chinese of the National Committee of the Chinese People’s Political Consultative Conference, and chairman of the Hong Kong New Era Development Thinktank.
The views do not necessarily reflect those of China Daily.
