(Economic Observation) Mainland China and Hong Kong Interconnection have added new works. What are the deep meanings revealed by the landing of "Southbound Link"?
China News Service, Beijing, September 15 (Reporter Xia Bin) More than four years after the "Northbound Link" landed, the "Southbound Link" finally landed on its boots, and the mainland and Hong Kong market interconnection have come up with the latest masterpiece.
The People's Bank of China announced on the 15th that the "Southbound Link" will be launched on September 24, 2021.
What deep meaning does this mechanism reveal when it is officially implemented?
First, support Hong Kong in consolidating and upgrading its status as an international financial center.
The joint announcement issued by the Central Bank of China and the Hong Kong Monetary Authority mentioned that the “Southbound Link” complies with the relevant laws and regulations of the mainland and Hong Kong bond markets, abides by the current Hong Kong bond market policy framework, and does not change the “going out” of mainland institutional investors to invest in Hong Kong and Hong Kong. Policy arrangements for the global bond market.
In an interview with a reporter from China News Agency, the relevant person in charge of the People’s Bank of China said that for mainland institutions, “Southbound Link” is actually an important channel for “one-point investment in the world”. It can not only invest in the Hong Kong market but also allocate global bonds. Globally, the corresponding counterparty is a market maker in Hong Kong, which supports the entire financial industry in Hong Kong.
"In addition to being an important channel, Hong Kong's advantage is also the largest offshore RMB offshore center overseas. The'Southbound Link' will also promote the development of the offshore RMB market in the future, and it will also help the RMB to be used more freely." To put it bluntly, the investment demand of the Mainland will be transformed into a global development opportunity for Hong Kong financial institutions, which can enhance Hong Kong’s international competitive advantage and its position in the global financial market.
Chen Shaozong, head of HSBC Capital Markets Greater China, said that "Southbound Link" is an important milestone in the development of Bond Connect. Its launch will accelerate the development of Hong Kong's bond market and attract more bond issuers from all over the world. Hong Kong issued bonds.
Second, financial openness facilitates domestic investors' global deployment.
"The global financial community is looking forward to the expansion of Bond Connect, which will open up new opportunities for Chinese capital. The opening of Southbound is of great significance. It will consolidate the position of the Hong Kong market in bond financing and will also help accelerate the region. Capital flows provide domestic investors with opportunities for diversified asset allocation in overseas markets." said Li Bing, president of Bloomberg LLP Asia Pacific.
Fidelity International fixed income fund manager Cheng Hao said that the launch of the “Southbound Link” of bonds marked the further improvement of the bond link mechanism. The realization of two-way interoperability in the domestic and foreign bond markets is an important manifestation of the continued opening up of China's financial markets.
Under the "Southbound Link" system, domestic investors will be able to independently choose transaction settlement arrangements. It is expected that this will effectively increase the enthusiasm and activity of domestic institutions to participate in cross-border bond allocation, making "Southbound Link" a convenient and efficient cross-border bond bond. Configure channels.
Cheng Hao further stated that the opening of the "Southbound Link" is conducive to domestic investors' deployment of overseas Chinese-funded bonds, especially Chinese-funded US dollar bonds that account for more than 90%.
Due to the significant differences between Chinese-funded US dollar bonds and domestic credit bonds in terms of liquidity, risk return, and variety distribution, they have a greater cross-border diversified allocation value for domestic investors.
Thirdly, mature experience and practice highlight the advantages of the system.
The “Notice on Developing the Interconnection of the Mainland and Hong Kong Bond Markets in Southbound Cooperation” issued by the People’s Bank of China mentioned that domestic bond registration and settlement institutions approved by the central bank should be opened in Hong Kong bond registration and settlement institutions approved by the Hong Kong Monetary Authority. Nominee account is used to record the balance of all bonds held on behalf of domestic investors.
The domestic custodian and clearing bank approved by the central bank shall establish a connection with the Hong Kong bond registration and settlement institution or the Hong Kong custodian bank to provide domestic investors with services such as bond custody and settlement.
The above-mentioned person in charge said that the above-mentioned institutional arrangement is to turn Hong Kong’s more mature practical basis in the bond market into a “south-bound” supporting mechanism arrangement. This is a very flexible and vivid system under the entire “one country, two systems”. The advantages are reflected.
In addition, the two places will continue to deepen their supervisory cooperation.
The People’s Bank of China will supervise and manage domestic investors’ participation in the “Southbound Link” in accordance with the law, and, in conjunction with the Hong Kong Monetary Authority, will continue to improve the regulatory cooperation arrangements for the interconnection of the mainland and Hong Kong bond markets, and jointly safeguard the legitimate rights and interests of domestic and foreign investors in cross-border investments. .
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