The long-await Bond Connect scheme is the latest attempt by Beijing to open its financial markets and attract foreign capital, reports the BBC.
China’s $9trn (£6.9trn, €7.9trn) bond market is the third-largest in the world but only 2% of mainland bonds are foreign owned.
Bonds can initially be bought by banks, insurers and fund manager via Hong Kong.
Market development
The Hong Kong Monetary Authority (HKMA) said Bond Connect is intended to “promote the development of the bond markets in mainland China and Hong Kong”.
“Trial operation of ‘Northbound’ trading will commence on 3 July 2017.”
No date has yet been set for ‘Southbound’ trading out of China.
Not to be underestimated
Mo Ji, chief economist Asia ex Japan at Amundi, said: “This is another step in the normalisation of Chinese capital markets which is a trend that no one should underestimate.
“Chinese stock markets account for 10% of global market cap, and Chinese bond markets rank third in the world. We will see their integration into global markets go progressively deeper. Governance and transparency will continue to improve in the process.
“Investors who ignore this strategic development will be at a significant disadvantage. We will increasingly see Central Banks buying Chinese government bonds. Likewise, Amundi expects to fully participate in Bond Connect, especially in relation to government bonds, and in the recent inclusion of Chinese A-shares in MSCI indices in late June.”
