China Considers Further Opening-Up of Bond Market to Foreign Investors

Premier Li Keqiang said China is considering whether to further open up its bond market to foreign investors in the future.

Li made the remarks at a news conference on the sidelines of the National People’s Congress, the country’s top legislature, which concluded today.

“We are preparing a trial program on a bond connect between mainland China and Hong Kong, which will allow foreign investors to purchase mainland bonds from Hong Kong. This is the first time we have mapped out such a program,” Li said.

The move will enhance Hong Kong’s position as an international financial center, Li said. It will also give Hong Kong residents more channels for investment and will benefit Hong Kong’s long-term stability and prosperity, he said.

Li also reiterated that the central government’s position on Hong Kong’s “One Country, Two Systems” system is unchanged, pointing out that the central government will continue to bolster the development of Hong Kong by rolling out more polices in favor of cooperation between the mainland and Hong Kong.

The Hong Kong Stock Exchange (HKSE) posted a statement on its website Wednesday that describes the proposed bond connect program between the Chinese mainland and Hong Kong as a “major breakthrough.” The HKSE said it will prepare for the program and provide more details in the future.

As of the end of 2016, more than 400 foreign investors held nearly 870 billion yuan ($125.8 billion) worth of bonds in the interbank bond market in China, up 83.4 billion yuan from the end of 2015, according to the State Administration of Foreign Exchange.

Contact reporters Pan Che (chepan@caixin.com) and Song Shiqing (shiqingsong@caixin.com)