Pan Gongsheng: Will continue to increase the proportion of foreign exchange reserves allocated in Hong Kong
"The People's Bank of China has always been an important participant and supporter of Hong Kong's development as an international financial center."
Pan Gongsheng, Governor of the People's Bank of China (PBoC), stated at the Hong Kong Currency and Fixed Income Summit on July 7.
In recent years, the PBoC, in collaboration with relevant departments of the mainland and the Hong Kong SAR government, has rolled out a series of pragmatic initiatives including Bond Connect, Shanghai-Shenzhen-Hong Kong Stock Connect, Cross-border Wealth Management Connect, Swap Connect, and currency swap agreements signed with the Hong Kong Monetary Authority (HKMA), to continuously support the development of Hong Kong as an international financial center.
Moving forward, the PBoC will continue to support the development of Hong Kong's international financial center from four key directions: deepening interconnection of financial markets to support the prosperity and development of Hong Kong's capital market; supporting Hong Kong in developing a diversified financial market; consolidating Hong Kong's position as an offshore RMB business hub; and firmly safeguarding Hong Kong's financial stability and security.
At the summit, Pan Gongsheng announced multiple incremental policy measures for the first three key directions, including: expanding the scale and scope of the southbound Bond Connect, raising its annual net investment quota from the current 500 billion yuan to 800 billion yuan; supporting Hong Kong in launching 5-year offshore RMB treasury bond futures; and enriching offshore RMB market liquidity by expanding the scale of the RMB business facility from 200 billion yuan to 500 billion yuan and extending its tenor to 3 years.
"Governor Pan Gongsheng announced a series of measures to strengthen cross-border financial cooperation," said Eddie Yue Wai-man, Chief Executive of the HKMA, in a subsequent media meeting. These measures mainly involve supporting the development of Hong Kong's fixed income and currency markets, optimizing and upgrading interconnection mechanisms, and supporting the growth of Hong Kong's offshore RMB market.
"The relevant arrangements have fully incorporated suggestions and feedback from market institutions and investors. We believe they will bring greater policy space and operational convenience to the industry, as well as new impetus and opportunities for the development of Hong Kong's fixed income and currency markets and the construction of the offshore RMB market," Yue noted.
Expanding the Scale and Scope of the Southbound Bond Connect
"The capital market is the core and cornerstone of Hong Kong's status as an international financial center," Pan Gongsheng stated. The PBoC will continue to support more high-quality enterprises to list and issue bonds in Hong Kong, continuously optimize and expand interconnection between the mainland and Hong Kong in areas such as stocks, bonds, wealth management, and interest rate swaps, and deepen financial cooperation in the Guangdong-Hong Kong-Macao Greater Bay Area.
To this end, Pan Gongsheng announced a number of incremental policy measures to deepen interconnection with Hong Kong's financial markets.
First, expanding the scale and scope of the southbound Bond Connect.
Pan Gongsheng stated that the annual net investment quota of the southbound Bond Connect will be raised from the current 500 billion yuan to 800 billion yuan, southbound Bond Connect bonds will be included in the scope of repo support, the product range will be extended to Hong Kong dollar bonds and RMB bond-related products, with radiating coverage to the Macao bond market.
"This expansion will help provide southbound Bond Connect investors with greater investment space, richer and more diversified investment options, meet their needs for overseas asset allocation, and further enhance the convenience of southbound Bond Connect investment," Yue responded to reporters regarding the measures.
At the same time, Yue believes that this measure will help attract more domestic and international issuers and investors to participate in Hong Kong's bond market, promote the development of diversified products, boost the supply of Hong Kong's offshore RMB products, and consolidate and enhance Hong Kong's status as an international financial center and offshore RMB business hub.
Second, continuing to increase the proportion of China's foreign exchange reserves allocated to assets in Hong Kong.
Pan Gongsheng stated that in 2025, it was mentioned that the proportion of China's foreign exchange reserves allocated to assets in Hong Kong would be increased. Over the past year, China's foreign exchange reserves have continued to conduct asset allocation and investment transactions in Hong Kong, and the proportion of asset allocation in Hong Kong will continue to be raised in the future.
Statistics from the State Administration of Foreign Exchange show that as of the end of June 2026, China's foreign exchange reserves stood at 3.4163 trillion US dollars.
Supporting Hong Kong in Developing a Diversified Financial Market
Hong Kong's financial market has traditionally been dominated by the stock market, while sub-markets such as bonds, gold, commodities, and derivatives have great development potential.
Pan Gongsheng stated that the PBoC will, in response to market demand, continue to support Hong Kong in building a diversified financial market system and strengthen Hong Kong's functions as an international asset management center and wealth management center.
First, supporting Hong Kong in launching offshore RMB treasury bond futures.
According to the HKMA, Hong Kong Exchanges and Clearing (HKEX) will officially launch 5-year offshore RMB treasury bond futures on August 3, 2026.
Second, supporting Hong Kong in building a comprehensive financial trading platform.
Pan Gongsheng stated that the PBoC has guided the China Foreign Exchange Trade System to cooperate with the HKMA and the Securities and Futures Commission of Hong Kong (SFC), supporting Bond Connect Company Limited to upgrade into a trading platform operating entity, which will become Hong Kong's most important financial market infrastructure and provide infrastructure services for trading in financial markets such as bonds, currencies, and foreign exchange.
On the same day, the PBoC, the HKMA, and the SFC issued a joint announcement stating that the China Foreign Exchange Trade System will jointly build an electronic fixed income and currency trading platform in Hong Kong with HKEX. Based in Hong Kong and facing the international market, this platform will provide an open, fair, efficient, and stable fixed income and currency trading platform. Details such as the launch date of the trading platform will be further announced in due course.
Third, expanding the scope of using RMB bonds as eligible collateral in the offshore market.
Pan Gongsheng stated that the Hong Kong Futures Clearing House (HKCC) and the Stock Exchange of Hong Kong Options Clearing House (SEOCH) will be supported to accept northbound Bond Connect bonds as eligible collateral, enriching the RMB product lines for value preservation, risk hedging, and investment.
In this regard, the HKMA will actively promote the implementation of this measure, and simultaneously advance the inclusion of offshore Chinese government bonds as eligible collateral, with the goal of launching it within 2026.
Fourth, supporting the development of Hong Kong's gold market and promoting interconnection between the two places' gold markets.
Previously, the PBoC guided the Shanghai Gold Exchange to establish the first overseas gold delivery warehouse in Hong Kong and launch gold trading contracts settled in Hong Kong. It has actively supported Hong Kong in establishing a gold clearing and settlement system and realizing interconnection of gold trading and settlement with the Shanghai Gold Exchange.
On July 7, Hong Kong's Central Gold Clearing and Settlement System began trial operation, with supporting measures including the launch of the "HAU" (Hong Kong Gold) price code.
Pan Gongsheng stated that relevant entities will be supported to launch more RMB-denominated commodity futures and spot products later, and HKEX will be supported to deepen cooperation with overseas exchanges such as the London Metal Exchange, integrating RMB-related elements.
Enriching Liquidity in Hong Kong's Offshore RMB Market
"As the international monetary system evolves faster toward multi-polarization, international demand for the RMB is extending from trade settlement to broader fields such as investment, financing, pricing, and reserve," Pan Gongsheng stated. As an important testing ground for the country's "pilot first" opening-up strategy, Hong Kong's status as a gateway for overseas investment in the mainland market and a global offshore RMB business hub will be further enhanced.
To this end, the PBoC will further introduce four measures to develop the offshore RMB market.
First, enriching liquidity in Hong Kong's offshore RMB market.
Pan Gongsheng stated that the HKMA will be supported to increase the scale of the RMB business facility from the current 200 billion yuan to 500 billion yuan, and extend its usage period to no more than 3 years.
The RMB business facility can provide stable and low-cost medium- and long-term RMB funding sources for commercial banks in Hong Kong.
Previously, the PBoC and the HKMA signed a standing swap arrangement of 800 billion yuan, supported the HKMA to use the standing swap funds to set up a 100 billion yuan trade financing arrangement, and later upgraded it to establish a 200 billion yuan RMB business facility, which received enthusiastic participation from market entities. On this basis, the PBoC has decided to raise the scale of the facility.
The HKMA stated that the previous RMB liquidity facilities provided to banks had tenors of 1 month, 3 months, 6 months, and 1 year, and this time tenors of 9 months, 2 years, and 3 years will be added. The above measures will be launched on July 10, 2026.
In addition, on June 17, Pan Gongsheng announced the establishment of a repo facility for foreign central banks at the Lujiazui Forum. According to him, the facility has now completed its first contract signing and first transaction with the HKMA. The HKMA can obtain RMB liquidity from the PBoC through repo transactions using high-grade bonds such as Chinese government bonds, which facilitates Hong Kong's management of offshore RMB liquidity.
Second, continuously improving policies and measures related to cross-border RMB settlement and accelerating the expansion of cross-border RMB usage.
Hong Kong handles over 70% of the world's cross-border RMB settlement. Pan Gongsheng stated that the PBoC recently signed a trilateral memorandum of understanding on local currency settlement cooperation with Bank Indonesia and the HKMA, supporting Bank Indonesia and the HKMA to establish a bilateral local settlement mechanism cooperation framework, promoting direct trading between offshore RMB and Indonesian rupiah, and better supporting RMB usage in economic and trade exchanges between Hong Kong and Indonesia.
Third, deepening interconnection between the mainland and Hong Kong's fast payment systems.
Pan Gongsheng stated that based on the launch of Cross-border Payment Connect in June 2025, the scope of participating institutions in Cross-border Payment Connect will be expanded, application scenarios will be extended, functions and services will be optimized, risk control levels will be improved, and the Hong Kong RMB Real Time Gross Settlement (RTGS) system will be supported to play a key role in processing RMB transactions between the Chinese mainland and the offshore market.
Cross-border Payment Connect is the interconnection between the mainland's Online Payment Inter-bank Clearing System and Hong Kong's Faster Payment System (FPS). Residents of both places can make instant small-value cross-border remittances by entering the recipient's mobile phone number or account number.
Eddie Yue stated in June 2025 that Cross-border Payment Connect has effectively enhanced cross-border payment efficiency, facilitated economic and trade activities and personnel exchanges, and is conducive to consolidating and enhancing Hong Kong's status as an international financial center and offshore RMB business hub.
Fourth, supporting Hong Kong in building a deeper RMB asset pool to promote the precipitation of RMB in Hong Kong's offshore market.
At present, Hong Kong has a rich variety of investable RMB products, covering major asset classes such as stocks, bonds, repos, and derivatives.
Pan Gongsheng stated that the PBoC will continue to issue central bank bills on a regular basis, and support the Ministry of Finance of China to further increase the issuance scale of offshore RMB treasury bonds, enrich issuance tenors, and enhance the radiating influence of Hong Kong's offshore RMB market.
On June 16, the Ministry of Finance of the People's Republic of China in Hong Kong SAR tendered the issuance of the third tranche of 15 billion yuan RMB treasury bonds in 2026 to institutional investors, with a subscription multiple of 3.86 times. On May 28, the Ministry of Finance of China, on behalf of the central government, successfully issued 6 billion yuan green sovereign bonds in Hong Kong SAR.
"Currently, Hong Kong's offshore RMB bond market faces rare development opportunities," Pan Gongsheng stated. Against the backdrop of intensified global interest rate and inflation volatility, Chinese bonds, with their relative stability and low volatility, highlight their unique advantages in diversified allocation. Coupled with relatively low RMB financing costs, Hong Kong can seize the favorable opportunity to attract more sovereign governments and international enterprises to issue bonds and raise funds in Hong Kong, supporting Hong Kong to become a leading financing hub in the region.
This article is from the WeChat public account "Caijing MayFlower" (ID: Caijing-MayFlower), written by Gu Xinyu, edited by Zhang Wei, and published with authorization from 36Kr.