(Economic Observation) Bond Connect completed nearly 130,000 transactions in four years, two-way opening to promote RMB internationalization

　　China News Service, Beijing, July 2 (Reporter Xia Bin) On July 3, 2017, the "Northbound Link" of Bond Connect was officially launched. The first day of transactions was active, and a Unicom foreign investor was established to participate in China's interbank bond market. In the past four years, 2,650 investors from 34 countries and regions have participated in Bond Connect, and the total number of transactions has exceeded 129,000. The average daily transaction volume in June reached 30.5 billion yuan, a record high .

　　In fact, before the launch of the "Northbound Link" of Bond Connect, the People's Bank of China stated to the public that in the future, the supervisory authority will expand to the "Southbound Link" in due course in light of various situations, and use it as a domestic institution to "go out" to invest in overseas bonds Optional access to the market.

　　The Financial Secretary of the Hong Kong Special Administrative Region Government, Chen Maobo, recently revealed that the Monetary Authority and the Central Bank have prepared the implementation rules for the southbound opening of Bond Connect, and it is believed that they will be implemented soon.

　　"Southbound Link" is already on its way. What will its arrival bring to Bond Connect?

　　Li Yong, chief analyst of fixed income at Soochow Securities, believes that "Southbound Link" can meet the diversified investment needs of mainland investors and is conducive to the deployment of more abundant products to manage risks.

At the same time, the "Southbound Link" is positive for the development of Hong Kong's bond market.

　　There is a view that bonds are a shortcoming in Hong Kong's financial market, plagued by problems such as the overall small scale, insufficient supply of new issuances in the primary market, poor liquidity in the secondary market, and limited investor base.

"Southbound Link" will bring mainland investors and funds to the Hong Kong bond market, which will help attract companies to increase bond financing in Hong Kong.

　　The deputy director of CITIC Securities Research Institute Mingming also stated that "Southbound Link" helps to enrich the scope of domestic investors' choice of targets and increase the flexibility of the allocation of large-scale assets. The enrichment of assets helps reduce the risk of the overall portfolio.

　　At the same time, the opening of the financial market will also help increase domestic investors’ awareness of cross-border capital flows and exchange rate management.

Moreover, the “Southbound Link” may help smooth out the domestic and foreign interest rate differentials of the same subject, increase the investor’s rate of return while reducing corporate financing costs.

　　In the context of the steady improvement of China's economic level year by year, the attractiveness of renminbi assets to overseas investors has increased, and the demand for domestic funds to "go overseas" for investment is also rising.

As a two-way investment tool, Bond Connect, coupled with the "Southbound Link", will surely better facilitate the two-way opening of China's financial market, which will also promote the internationalization of the RMB.

　　Ba Shusong, managing director and chief China economist of the Hong Kong Stock Exchange, said bluntly that China's financial market continues to open up to the outside world, and the bond market is the main battlefield for the internationalization of the renminbi.

　　Zhu Haibin, chief economist of JPMorgan Chase China, said that although the proportion of overseas investors' asset allocation in China has increased, it is still around 3% to 4%. There is still a lot of room for growth in the future, and foreign investment is expected to increase further.

The renminbi is still a high-yield currency among major currencies. China’s economic and policy cycles are not exactly the same as those of the European and American economies, and renminbi assets are expected to become targets for overseas investors to diversify their risks.

　　Zhan Weiji, general manager of the Financial Markets Department of Industrial and Commercial Bank of China (Asia), pointed out that the US interest rate may change, the market is facing high risks, and abundant liquidity is seeking to diversify risks; the RMB exchange rate is relatively stable and has a tendency to appreciate. It is also relatively attractive and provides good investment returns, which is conducive to the further advancement of the internationalization of the RMB bond market.

　　As Li Bing, President of Bloomberg Asia Pacific, said, the pace of internationalization of China's bond market will not stop. China will accelerate the process of internationalization of the bond market with a more confident attitude and achieve high-quality two-way opening.

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