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E-mail China.org.cn, May 22, 2024
Market News International:
Since the introduction of Northbound Trading of Swap Connect , what is your evaluation of Swap Connect so far? Will the PBOC increase the current trading quota? And what new measures will the central bank take for the further opening of China's bond and derivatives market? Thank you.
Zhou Yu:
Thank you for your question. Swap Connect is indeed an important measure to prompt the opening-up of China's financial market in recent years. Its main function is to assist overseas investors to better manage their interest rate risks, which is very helpful to enhance the attractiveness of the domestic financial market. Since its launch in May last year, from our observations, it has been operating smoothly, achieving a total transaction volume of 1.2 trillion yuan in less than a year as of the end of last month. You also asked about its quota. Based on the current situation, the existing quota is sufficient. Of course, we also considered this, and if the quota is insufficient in the future, we have a communication mechanism with the Hong Kong regulatory authorities. We will consider increasing the quota in a timely manner based on the actual situation of market development.
You also asked about the opening-up of China's bond and derivatives market. I would like to give you a brief introduction. The opening-up of China's financial industry mainly includes two parts: one is the opening-up of financial markets you just asked about, and the other is the opening of financial services. Regarding the opening-up of financial markets, we continue to steadily expand the two-way opening-up of financial markets. The well-known market interconnection mechanisms, such as Shanghai-Hong Kong Stock Connect , Shenzhen-Hong Kong Stock Connect , Bond Connect , and Cross-boundary Wealth Management Connect Scheme in the Guangdong-Hong Kong-Macao Greater Bay Area (Cross-boundary WMC) , are all operating stably. With the arrangement of these mechanisms, we are also constantly exploring new measures to make investors' investment activities more convenient under these mechanisms.
For example, in January this year, we worked with the Hong Kong Monetary Authority to include bonds under Bond Connect into the scope of eligible collateral for the Hong Kong Monetary Authority's renminbi liquidity arrangements, and opened up the business for overseas investors to participate in domestic bond repurchase . Previously, only overseas central banks, overseas sovereign institutions and overseas renminbi business clearing banks could participate in bond repurchase. However, since this opening-up, all overseas institutions entering China's inter-bank bond market can participate in our bond repurchase. This approach can enhance the attractiveness of China's bond market.
At the same time, we are also continuously optimizing the pilot of the Cross-boundary WMC. For example, a recent measure is that the sales business of renminbi deposit products of mainland banks is now included in the scope of eligible products for Northbound Trading. As of the end of February, the total amount of China's bonds held by overseas institutions was 3.95 trillion yuan, close to 4 trillion yuan, and the growth rate has remained at about 30% in recent years. This also shows the achievements of the opening-up of China's financial market and demonstrates the attractiveness of China's bond market.
Another important aspect of financial openness is the opening of the financial service industry, also known as the access issue of foreign financial institutions. From the perspective of access, since 2018, we have significantly relaxed market access in the financial service industry, which has received positive feedback and attracted more than 110 foreign financial institutions to operate in China. In November last year, we issued a bank card clearing business license to Mastercard NUCC Information Technology (Beijing)Co., Ltd, the joint venture of Mastercard and NetsUnion Clearing Corporation (NUCC) .
For foreign financial institutions, it is not only access that is important, but also their operations. In terms of operations, while treating Chinese and foreign financial institutions equally, we also fully consider the uniqueness of foreign financial institutions and understand some practical difficulties and demands they encounter when operating in China. Under the premise of maintaining fair competition, we are working to create a better business environment for them. For example, the PBOC has introduced a carbon reduction supporting tool, a structural monetary policy tool, through which low-cost loans are provided to financial institutions. When it was first launched, only Chinese-funded financial institutions could enjoyed such low-cost loans.. However, many foreign institutions showed interest. In a safe and secure manner, we fully considered the demands of foreign institutions and continuously expanded the scope of financial institutions that can participate in the scheme for carbon reduction.. To date, 13 foreign banks have now been included, which is a practical measure demonstrating our continuous expansion of opening-up.
Overall, we have been constantly improving our financial supervision capacity. On the premise of maintaining financial security and financial stability, we have coordinated openness and security, continued to strengthen the connectivity of domestic and overseas financial markets, and created a market-oriented, law-based and international world-class business environment to attract more foreign investment and long-term capital to do business in China, take root and bear fruits. Thank you.
