Hong Kong Monetary Authority and People’s Bank of China announce RMB100 billion trade financing liquidity facility and connectivity upgrades for Bond Connect and cross-boundary payments

The Hong Kong Monetary Authority (HKMA) and the People’s Bank of China (PBoC) published a package of measures to deepen financial market connectivity between Hong Kong and the Mainland, centred on a new RMB Trade Financing Liquidity Facility for Hong Kong banks alongside enhancements to Bond Connect, offshore RMB liquidity tools and cross-boundary payment arrangements. The RMB100 billion facility will provide 1-month, 3-month and 6-month RMB funding priced off onshore interest rates plus a spread, delivered via repo transactions and a new option for banks to swap Hong Kong dollar funds for RMB with the HKMA, with RMB sourced from the PBoC under the institutions’ Currency Swap Agreement. Southbound Bond Connect will be upgraded by extending settlement time under the central securities depositories linkage and supporting settlement of multi-currency bonds in RMB, Hong Kong dollar, US dollar and euro, with a further expansion of eligible Mainland investors flagged for “due course”. The measures also support an offshore RMB repo business using Northbound Bond Connect bonds as collateral, and provide for onshore bonds issued by the Ministry of Finance and Mainland policy banks held under Northbound Bond Connect to become eligible margin collateral for derivatives cleared at OTC Clearing Hong Kong Limited, following consensus among the HKMA, the PBoC and the Securities and Futures Commission. Separately, the HKMA and PBoC are working to link the Mainland’s Internet Banking Payment System with Hong Kong’s Faster Payment System for 24x7 real-time, small-value cross-boundary remittances using a recipient’s mobile number or account number, and the HKMA published an FAQ on current cross-boundary remittance policy arrangements. The HKMA will provide further operational details of the RMB Trade Financing Liquidity Facility in due course, with launch expected by late February, while additional details on the OTC Clearing Hong Kong Limited margin collateral arrangement will also follow. Some linked IBPS–FPS remittance services are expected to be introduced around mid-2025, with functionality to be expanded over time, and the offshore RMB repo business is described as launching soon.