Higher forex, southbound investment to give ‘vitality’ to Hong Kong: PBOC chief Mainland China’s foreign reserves would continue to increase asset allocation in Hong Kong, providing further momentum to the city’s capital market development, the governor of the People’s Bank of China (PBOC) said on Tuesday. Speaking at the Hong Kong FIC & Bond Connect Summit, Pan Gongsheng unveiled several substantial policy enhancements, including a 60 per cent hike in the investment quota for Bond Connect’s southbound segment, alongside measures to expand investment channels and diversify eligible products. “This will give vitality to Hong Kong,” Pan told the summit. As a core measure to strengthen cross-border financial ties, Pan announced that the annual net investment quota under the Bond Connect scheme would be increased to 800 billion yuan (US$117.82 billion) from the current 500 billion yuan quota. The programme would also expand the number of eligible products to include Hong Kong dollar bonds and related yuan-denominated assets, with the scope extended to cover Macau’s bond market. Building on an initiative introduced early last year, Pan noted that the state’s foreign exchange reserve had been actively deployed in Hong Kong for asset allocation and investment trading. The strategic development would continue to scale up, he said. Amid heightened global interest rate and inflation volatility, Pan noted that Chinese bonds offered a “unique diversification configuration” that continued to attract international investors due to their relative stability. Coupled with lower yuan financing costs, this presented a prime window to attract more sovereign and international corporate issuers to Hong Kong, he added. To solidify Hong Kong’s status as a global financial hub, Beijing would heavily reinforce the city’s currency supply. Pan announced that the central bank would support the Hong Kong Monetary Authority in expanding its dedicated renminbi liquidity facility to 500 billion yuan, up significantly from the current 200 billion yuan. The facility’s maximum tenor would also be extended to up to three years, ensuring commercial banks in the city had a stable, low-cost source of medium-to-long-term yuan funding. “Hong Kong is the world’s largest offshore renminbi business centre, and further developing the liquidity supply for the offshore renminbi market is a foundational arrangement,” Pan said. Beyond fixed income, the central bank is steering efforts to diversify Hong Kong’s financial ecosystem to strengthen its wealth management capability. Pan pointed out that while Hong Kong’s financial market had traditionally been equity-driven, there was “significant development potential” in submarkets such as bonds, gold, commodities and derivatives. During the summit, Pan confirmed that Hong Kong would soon launch five-year offshore renminbi bond futures, providing a vital risk-management tool for global investors managing sovereign debt exposure. The PBOC would also support the roll-out of more yuan-denominated commodity futures and spot products, while encouraging the Hong Kong Exchanges and Clearing to deepen cooperation with offshore platforms, such as the London Metal Exchange, to incorporate more renminbi elements into global commodity pricing, he added. “The central government fully supports Hong Kong maintaining its unique status and advantages over the long term,” Pan said, reiterating Beijing’s commitment to consolidating the city’s position as an international financial, shipping and trade centre, while safeguarding a “free, open, and regulated business environment.” https://www.scmp.com/business/banking-finance/article/3359655/more-mainland-china-forex-reserve-investment-give-vitality-hong-kong-pboc-chief?pgtype=live (ICE HONG KONG)

Fonte notizia: South China Morning Post