People's Bank of China (PBoC) governor, Pan Gongsheng, announced on Tuesday various measures to bolster bond, currency, as well as gold trading in Hong Kong, as Beijing steps up efforts to establish the city as an offshore renminbi hub.

Speaking at the Hong Kong FIC & Bond Connect Summit, he said the quota for the southbound Bond Connect trading scheme between Hong Kong and the mainland would be expanded to 800 billion yuan, from the current 500 billion yuan, marking a 60 percent increase.

The scheme allows mainland investors to be able to purchase bonds in the SAR more easily.

"This programme would also expand the number of eligible products to include Hong Kong dollar bonds and relevant renminbi-denominated assets, with the scope extended to cover Macao's bond market," he told participants.

"Meanwhile, over the past one year and a half, the nation's foreign exchange reserves have continuously carried out asset allocation and investment transactions in Hong Kong.

"In the future, the country's foreign exchange reserves continue to increase the proportion of assets allocated to Hong Kong, injecting more vitality into the development of Hong Kong's capital market," he added.

Separately, Pan noted the SAR should be able to attract more sovereign issuers and international firms to issue yuan-denominated bonds in the city — considering yuan-denominated bonds' advantages and as the city aims to become a leading finance hub in the region.

"Chinese bonds, with their relative stability and low volatility, offer distinct diversification advantages, and continue to attract demand from international investors seeking to allocate assets," Pan told the forum.

"Coupled with lower yuan financing costs, Hong Kong's offshore yuan bond market now faces a development opportunity."

Pan's remarks also came as Hong Kong launched the trial operation of a new centralised gold clearing and settlement system, as part of the efforts to become a regional gold trading centre.

Pan noted the PBoC would offer "proactive support" for the city's new system, adding there was "significant development potential" in developing the city's sub-markets, such as those in gold, commodities, and derivatives.

He added the PBoC would also support the SAR in rolling out more yuan-denominated commodity futures and spot products, while encouraging the city to deepen cooperation with overseas markets, such as the London Metal Exchange, to add more renminbi elements into the global commodity pricing.

Elsewhere, Pan said the country's central bank would heavily reinforce the city's currency supply to solidify the city's status as a global financing hub.

Specifically, the PBoC would support the Hong Kong Monetary Authority to expand its dedicated RMB Business Facility to 500 billion yuan, up from the current 200 billion yuan.

The facility's maximum tenor would also be extended to up to three years so that local commercial lenders would enjoy a stable, low-cost source of yuan funding in the short to medium term.

The summit also saw the signing of a memorandum of understanding by Hong Kong Exchanges and Clearing and the Cross-Boundary Interbank Payment System (CIPS), to strengthen the city's role as a premier offshore renminbi centre. (Additional reporting by Reuters)




Edited by Tony Sabine