HONG KONG - Hong Kong will launch a new yuan-denominated trade finance scheme and expand the hours and scope of its Bond Connect program for Chinese mainland investors, Eddie Yue Wai-man, Chief Executive of the Hong Kong Monetary Authority, said on Monday.

The announcement came alongside others made by People’s Bank of China Governor Pan Gongsheng at a business conference, including pledges to help the Hong Kong Special Administrative Region provide cheap yuan funding in the territory and measures to support the yuan.

Beijing will support Hong Kong in the launch of the trade finance scheme using 100 billion yuan ($13.64 billion) in currency swaps for one, three and six months, Yue told reporters on the sidelines of the Asia Financial Forum in Hong Kong.

The PBOC and the HKMA have a currency swap arrangement for a total 800 billion yuan.

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Under the new facility, banks can exchange their Hong Kong dollars for yuan funding with the HKMA at interest rates linked to onshore rates, providing banks in the SAR with a stable source of relatively lower-cost yuan funds, Yue said.

The new facility will further enhance the liquidity of Hong Kong’s offshore RMB market, meet the increasing funding demand from enterprises for RMB trade financing, and strengthen Hong Kong’s leading position as the global offshore RMB business hub, according to an HKMA statement.

It added that details of the facility will be announced in due course, with the launch expected to take place by late February.

Yue said the settlement deadline for the Bond Connect scheme will be extended to 4:30 pm (0830 GMT) and expanded to include US dollar and euro-denominated bonds, besides yuan bonds. The scope of eligible mainland investors will also be expanded in due course.

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The HKMA said these measures will further broaden overseas investment channels for mainland institutional investors, address their needs for diversified asset allocation, and improve transaction and settlement efficiency.

They will also bolster the development of the Hong Kong bond market, particularly the Dim Sum bond market, it added.

Yue also said that the HKMA will promote yuan repurchase agreements, allowing international investors to use onshore bonds as collateral for yuan funds in Hong Kong, from Feb 10.

Facilitating cross-boundary payments

The HKMA and the PBOC are also working to implement the linkage of the mainland’s Internet Banking Payment System and the SAR’s Faster Payment System.

This linkage can support residents in both places in making real-time, small-value, cross-boundary remittances, by entering the recipient’s mobile number or account number, the HKMA said, adding that some services are expected to be launched around mid-2025.