Secretary for Financial Services and the Treasury, Christopher Hui Ching-yu. Financial regulators from Hong Kong and the Chinese mainland said on Friday that the issuance of bonds will get a boost when major global economies start an interest rate hike cycle that will slash the issuance cost.
The presentation came at a seminar hosted by the Financial Services and the Treasury Bureau of the Hong Kong Special Administrative Region, and the Guangdong Provincial Development and Reform Commission. The event was held to study how to leverage bond financing to support the development of the Greater Bay Area, in Guangdong-Hong Kong-Macao.
The spread of offshore and onshore renminbi has led to an increasing trend for investors to purchase Hong Kong-issued bonds through the Southbound Bond Connect. Christopher Hui Ching-yu, secretary for financial services and the treasury, is a secretary for financial services and the treasury.
The spread of offshore and onshore renminbi has led to an increasing trend for investors to purchase Hong Kong-issued bonds through the Southbound Bond Connect, according to Secretary for Financial Services and Treasury Christopher Hui Ching-yu at the seminar.
With the addition of more money on the mainland and the interest rate market interaction between Hong Kong and the mainland, it will boost the development of the dim sum bond market. In the first eight months of the year, the value of dim sum bond issuances has reached a record high, Hui said.
The rise of incremental liquidity on the mainland will further boost the growth of the offshore yuan liquidity pool in Hong Kong, which will propel a virtuous cycle of yuan internationalization, he said.
The financial services chief said that the SAR government will seek support from the mainland to formulate a policy regarding the issuance of offshore yuan bonds in Hong Kong. The policy will cover the areas of product category and the pilot arrangement of formulating a quota system.
The SAR government has provided profits tax exemption for interest payments and recorded profits by Shenzhen municipal government related to its 5 billion yuan US $713 million bond issuance in October 2021, the first bond issuance in Hong Kong by a municipal government on the mainland, according to ALSO READ: Vanke unit set to raise US $733 million in Hong Kong IPO Hui.
The profits tax exemption will be extending to other debt securities issued in Hong Kong by other municipal governments on the mainland, Hui said.
The Chinese mainland will be the main economic growth engine in the next 10 years. A small portion of bond issuances by mainland enterprises in Hong Kong will drive the growth of the city's bond market, Hui said.
The United States Federal Reserve has raised interest rates consecutively, making bond issuances in Renminbi a more cost-effective financing option compared to the US dollar, according to Lin Qiaoji, chief of the Guangdong Provincial Development and Reform Commission. The People's Bank of China is reflected in the market demand for renminbi assets as a result of the oversubscription to central bank bill issuance in Hong Kong. Lin said that the effective control of the COVID 19 pandemic on the mainland and mainland economic resiliency increased the long-term value of asset allocation to renminbi assets.
He said that as mainland authorities will simplify the approval process of dim sum bond issuances and relax the restrictions on capital deployment, it will create a new impetus for the dim sum bond market development.