Hong Kong is intensifying its efforts to solidify its standing as China's primary offshore renminbi hub, as detailed by Chief Executive John Lee in his recent policy address. A key initiative involves the launch of the Hong Kong Exchanges and Clearing Limited’s Offshore RMB Bond Index, which is expected to serve as a market benchmark and an underlying index for exchange-traded funds, thereby boosting trading activity for offshore yuan bonds, also known as "dim sum" bonds. This move is part of a broader strategy to promote wider offshore use of the yuan.
The city's first five-year development plan, covering 2026-2030, places significant emphasis on deepening Hong Kong's role in promoting yuan use across financing, investment, and trade. John Lee highlighted plans to establish a mechanism to enhance currency liquidity and develop a comprehensive, cross-boundary yuan circulation network. The government will also explore settling its own expenditures in yuan under suitable scenarios to lead by example.
Further measures to bolster Hong Kong's offshore yuan capabilities include the Hong Kong Monetary Authority introducing a tendering mechanism for seven-day offshore yuan liquidity to help banks meet short-term financing needs. The HKMA will also explore issuing offshore yuan short-term debt instruments to provide more high-quality investment products and support the building of an offshore yuan yield curve. Additionally, there are plans to enhance the currency swap agreement with the People's Bank of China and encourage more foreign banks in Hong Kong to join the Cross-border Interbank Payment System (CIPS).
To expand the dim sum bond market, Hong Kong aims to increase the scale and frequency of bond issuance with an enhanced tenor structure, seeking support from the Ministry of Finance and encouraging policy financial institutions to issue bonds in the city. Regulators are also exploring expanding the product scope under the Southbound Bond Connect to include Hong Kong dollar and yuan bonds as underlying assets, preparing for the inclusion of yuan counters under the Stock Connect, and developing a bond repurchase business using Southbound Bond Connect bonds as collateral to vitalize assets for investors.
