Hong Kong Exchanges and Clearing (HKEX) launched the Five-Year China Government Bond (CGB) Futures on Monday, marking the first and only CGB futures contract available in the offshore market.

The debut came as the Chinese mainland and Hong Kong regulators unveiled a new suite of measures aimed at strengthening the special administrative region’s capital market and deepening ties between the two markets.

The underlying asset of the product is five-year CGB issued on the mainland. Each contract has a size of 500,000 yuan ($74,059) and is settled in renminbi. To encourage participation, HKEX is offering a 50 percent discount on trading fees, lowering the cost to 2.5 yuan per contract through July 30, 2027.

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Thirteen liquidity providers have been appointed for the launch, including five banks — the Bank of China (Hong Kong), Bank of Communications (Hong Kong), HSBC, ICBC (Asia) and Standard Chartered Bank — as well as eight securities firms.

“The coordinated opening up of onshore and offshore markets will provide international investors with convenient and efficient interest rate risk management tools, enabling them to hold Chinese bond assets with greater confidence,” said Wu Qing, chairman of China Securities Regulatory Commission (CSRC).

In the long run, the introduction and further development of the product will broaden the use of offshore renminbi, reinforce Hong Kong’s role as the global offshore renminbi business hub, and enhance the quality and efficiency of financial services for the real economy, he added.

Wu also announced a series of additional policy initiatives to deepen cooperation and bolster Hong Kong’s capital market growth.

“We will, as always, support mainland companies with international expansion plans in listing in Hong Kong, and support high-quality Hong Kong-listed firms in pursuing listings on the mainland,” Wu said. Regulators will also encourage eligible Hong Kong enterprises to issue bonds on the mainland, he added.

Authorities will back closer collaboration between index providers in the two markets to launch more indices based on Chinese assets. Industry participants will be encouraged to roll out more exchange-traded funds linked to both markets and aligned with China’s modern industrial system, while the ETF registration mechanism will be optimized to enhance the global influence of Chinese indices and assets.

“We will deepen cooperation between the two futures markets and support Hong Kong in launching more renminbi-denominated and settled futures products, building a more diversified asset ecosystem,” Wu said.

He added that regulators will support more securities firms and fund managers in establishing and scaling up operations in Hong Kong, fostering top-tier investment banks and institutions capable of providing efficient and tailored financial services to Chinese enterprises and investors expanding globally.

Authorities will also study expanding the scope of mutual qualification recognition for securities and futures professionals to ease cross-border employment.  

In addition, Wu said the CSRC will strengthen cooperation with Hong Kong’s Securities and Futures Commission (SFC) in supervision and governance to safeguard the stable and sound operation of both markets.

Hong Kong Chief Executive John Lee Ka-chiu said the new measures will support the growth and cross-border financing of enterprises in both Hong Kong and the mainland.

“By deepening cooperation in indices, futures and ETFs, the initiatives will enhance connectivity between the two markets,” Lee said.

Referring to the Swap Connect — a derivatives market access scheme launched in 2023 that allows international investors to trade and clear onshore renminbi interest rate swaps, Financial Secretary Paul Chan Mo-po said the introduction of the CGB futures “completes another key piece of the puzzle by providing a standardized, exchange-traded, liquid and priceable offshore hedging tool for Chinese government bonds”.

“Together, they create a more comprehensive risk management framework for offshore renminbi fixed-income products.”

SFC Chairman Kelvin Wong Tin-yau said the new futures contract will enhance participation, liquidity and pricing efficiency in the government bond market and facilitate two-way capital flows between the mainland and overseas markets.

He urged investors and asset managers to make full use of the product to hedge interest-rate risks, forming an effective complement to mechanisms such as Swap Connect, strengthening the offshore risk-management framework and steadily improving investment returns.

Contact the writer at irisli@chinadailyhk.com