The financial regulatory authorities of Hong Kong and the Mainland have recently announced a series of policy measures to promote and deepen cross-boundary financial connectivity and cooperation. One of the key focuses is the “Three Connections, Three Facilitations” initiative, jointly announced by the Hong Kong Monetary Authority (HKMA) and the People's Bank of China (PBoC) earlier this year, comprising six policy measures to support RMB internationalisation and facilitate business activities as well as Hong Kong peoples' everyday life in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA).  Among these measures, the enhancements to Cross-boundary Wealth Management Connect Pilot Scheme, expansion of cross-boundary e-CNY pilot in Hong Kong, and facilitation of remittances for property purchase in the Mainland cities in the GBA have already been implemented.  Through this article, I would like to share the latest developments of the other measures and give a preview of the other initiatives that we are working on.

Financial market connectivity

One of the “Three Connections” measures was to include onshore RMB bonds issued by the Ministry of Finance and policy banks on the Mainland in the list of eligible collateral for the HKMA's RMB Liquidity Facility.  This marks the first time that onshore bonds can officially be used as eligible collateral in the offshore market.  Since the measure took effect on 26 February, market response has been positive with banks in Hong Kong successfully using onshore bonds to obtain liquidity from the HKMA.

Building on this, the HKMA has been working with Mainland financial regulatory authorities to explore further broadening the use of onshore bonds as collateral in the offshore market.  The next imminent breakthrough that we are expecting is in relation to the use of onshore bonds under Northbound Bond Connect as eligible margin collateral for Northbound Swap Connect transactions.  This measure will provide investors with the additional choice of a non-cash collateral, reducing their liquidity cost and improving capital efficiency. It will also help vitalise offshore investors' onshore bond holdings and further enhance the attractiveness of onshore bonds.  The measure will also promote synergies between Bond Connect and Swap Connect, thereby further invigorating market participation in the Connect Schemes.  Relevant parties are working hard with a view to reaching consensus for public announcement soon. 

Financial regulatory authorities and participating institutions on both sides are also working closely on the “Three Connections” measure which aims to further open up the onshore repo market to institutional investors outside the Mainland.  We look forward to announcing further progress of this measure in the near future.  In the longer term, we will continue to work with Mainland authorities and infrastructure providers of both sides to promote broader use of onshore bonds as collateral in the international markets.  These measures will enhance the investment and allocation value of RMB assets and strengthen the appeal of RMB bonds to international investors, thereby promoting RMB internationalisation in a steady, orderly and sound manner.  This in turn will help consolidate Hong Kong's positions as an international financial centre and offshore RMB business hub.

In addition to financial market cooperation, the “Three Connections, Three Facilitations” initiative also includes financial policy support for businesses and individuals.  These aim to provide better support for enterprises’ business operations as well as financing and investment activities in both Hong Kong and the Mainland, and more convenient cross-boundary financial services and better user experience at the individual level.

Measures to support business

At the corporate level, the HKMA and the PBoC took a significant step to promote cross-boundary credit referencing (CBCR) in early 2024 to facilitate corporates' cross-boundary financing. We set out the cooperative arrangements for business pilots of two-way cross-boundary credit reference data connection with a view to facilitating companies in both places to access cross-boundary financing.  Currently, a number of pilot cases for southbound transfer of credit reference data to Hong Kong have been successfully conducted. These pilot cases were carried out through the cooperation of credit reference agencies in Shenzhen and Hong Kong, transmitting business data and related credit reference information of small and medium-sized enterprises (SMEs) to Hong Kong banks. The banks in Hong Kong used such information to complete their credit assessments for these enterprises, with a total loan amount of approximately HK$30 million. These pilot cases mark an important step in cross-boundary credit referencing between Hong Kong and the Mainland, helping to accumulate experience and provide a foundation to promote comprehensive cross-boundary credit data connection to resolve the pain points in SME cross-boundary financing, reduce their financing costs, and thereby serve the real economy.  Based on the successful pilot cases, the HKMA issued two regulatory circulars today.  The circulars aim to encourage banks to conduct pilot cases to meet their business development needs and promote cross-boundary financing services for SMEs, while providing guidance to the banking industry in their compliance with the relevant requirements when handling the cross-boundary transfer of credit reference data and ensuring data security and effective risk management. The HKMA will continue to promote and expand related work with local banks, credit reference agencies, and relevant Mainland organisations.

Facilitative measures for residents

At the individual level, as economic activities in the GBA further integrate, there is a growing trend for Hong Kong people to travel, live, work, and reside across the boundary, raising the demand for cross-boundary financial services.  Against this backdrop, the facilitative measure for cross-boundary remittances for property purchases in GBA cities were announced in the beginning of this year in response to demand from Hong Kong residents.  The measure provides a safe and convenient channel for Hong Kong residents to remit funds through the banking system to the Mainland.  Most retail banks in Hong Kong can now provide property purchase remittance services to their clients, and transactions have successfully been conducted since the implementation of the measure.  Meanwhile we noticed the public’s demand for further enhancement to cross-boundary remittance arrangements to facilitate their everyday life on the Mainland in respect of, for example, medical services, retirement and elderly care.  The HKMA is engaging with Mainland authorities to explore further facilitative measures under different scenarios.  Responses have been positive and discussions are progressing well.  Relevant measures will be launched as soon as they are ready.

It is also worth noting that the HKMA is working with the PBoC on cross-boundary payment linkage between Hong Kong and the Mainland. We will soon sign a Memorandum of Understanding with the PBoC to establish a cooperative framework for the linkage. This will provide a safe, efficient and convenient means for cross-boundary payment and settlement, facilitating economic activities and flows of people between the two places. Relevant details will be announced in due course.

The above measures on market connectivity and financial facilitation are the result of close cooperation amongst the HKMA, financial regulatory authorities and the industry players in Hong Kong and on the Mainland.  They will continue to be part of the HKMA's key priorities in the future.  We will continue to share updates to the public from time to time.

Eddie Yue
Chief Executive
Hong Kong Monetary Authority

28 June 2024