RMB Assets' Global Appeal Steadily Climbs

Guide: On July 3, 2017, the Mainland-Hong Kong Bond Market Connect (Bond Connect) officially launched, marking the opening of the northbound channel. Over the past nine years, Bond Connect has seen active trading and served as a vital bridge linking onshore and offshore financial markets, continuously advancing the opening-up of China's financial market.

Experts noted that Bond Connect has broadened overseas investors' access to China's interbank bond market. As the financial market opening-up progresses, the attractiveness of China's bond market is expected to keep rising.

Playing an Active Bridging Role

Data from Bond Connect Company show that in May 2026, northbound Bond Connect turnover reached RMB 893.1 billion, with 8,009 trades and a daily average of RMB 47 billion. Compared with the daily average of RMB 1.5 billion in the first month after launch, turnover has grown more than 30-fold.

Lin Chunhui, head of Asia-Pacific fixed income portfolios at Invesco, told China Securities Journal that Bond Connect attracts global investors, increases market liquidity, lowers financing costs for Chinese companies, provides offshore investors with RMB asset allocation channels, and helps elevate the RMB's international standing.

Over the nine years, foreign holdings of RMB bonds have steadily expanded and the number of participating institutions has grown significantly. Data show that as of the end of May, offshore institutions held RMB 3.21 trillion of bonds in the interbank market, accounting for about 1.8% of total custody in the interbank bond market. In May, four new offshore institutional investors entered the interbank bond market. As of the end of May, 1,198 offshore institutional investors had entered the market, including 633 through the settlement-agent channel, 842 through Bond Connect, and 277 through both channels.

"Bond Connect has provided offshore institutions with a more efficient and convenient channel to invest in China's bond market. It has not only promoted sustained growth and increasing diversification of investors, but also significantly boosted market trading activity, becoming one of the important channels for international investors to allocate RMB assets," said Wang Dahai, president of Bloomberg Greater China.

Pong Ngai, research director at the Hong Kong Trade Development Council, said that over the past nine years, Bond Connect has been more than a capital channel; it is a milestone in the institutional opening-up of China's bond market. Its core achievements include successfully attracting sticky investors such as global sovereign wealth funds and asset managers, optimizing the structure of bond market participants; substantially improving market depth and trading activity, especially liquidity in the interbank bond market; and shifting the appeal of RMB bonds from simply chasing yield premiums to "high-quality risk hedging" allocations.

Interconnectivity Mechanisms Keep Upgrading

After the smooth operation of the northbound Bond Connect, more two-way interconnectivity mechanisms were introduced. On September 24, 2021, the southbound Bond Connect was launched. On May 15, 2023, based on Bond Connect, the Mainland-Hong Kong Interest Rate Swap Market Connect (Swap Connect) officially went live.

"Compared with other offshore interconnectivity channels, Bond Connect's unique advantage lies in a mechanism that combines Chinese characteristics with international practice: it retains the depth and efficiency of China's interbank market while being designed to better suit international investors' operating habits, creating a unique liquidity 'siphon effect,'" Pong said.

In recent years, Bond Connect has rolled out more measures to facilitate offshore investors' participation, further lowering investment thresholds and operating costs, making cross-border bond investment processes smoother and information more transparent.

The upcoming launch of five-year RMB government bond futures in Hong Kong is one example. "As an important complement to Bond Connect, government bond futures will work together with the successfully operating Swap Connect to provide efficient risk management tools for offshore investors investing in China's bond market, further supporting the development of Hong Kong's RMB product ecosystem and reinforcing Hong Kong's position as a leading global offshore RMB hub," said Bonnie Chan Yiting, CEO of Hong Kong Exchanges and Clearing.

Pong said offshore government bond futures will complete the "final piece of the puzzle" for offshore investors' risk management, alleviating anxiety over the lack of short-hedging channels and significantly enhancing the diversity of market trading strategies.

Bond Market Appeal Set to Strengthen

As interconnectivity measures continue to upgrade and the financial market opening-up advances, the appeal of China's bond market is expected to keep improving.

Wang Dahai said that against a backdrop of heightened global interest-rate and inflation volatility, Chinese government bonds, with their relatively stable characteristics, stand out for their unique diversification advantages, attracting international investors to increase allocations. The appeal of Chinese bonds is shifting from a single yield-driven model to diversified asset-allocation value.

Lin Chunhui believes that Chinese bonds continue to provide unique diversification value for global portfolios and can deliver relatively stable performance even when global market volatility intensifies. Relevant authorities are also continuously promoting financial market reform and innovation, including developing green bonds and encouraging financial institutions to issue innovative bonds, creating more investment opportunities for offshore investors.

From a medium- to long-term perspective, experts suggest that to further enhance the appeal of China's bond market, efforts should be made to optimize Bond Connect's supporting interconnectivity mechanisms and attract more types of international long-term capital to continuously flow into China's bond market.

In Pong's view, regulators could further open up medium- to long-term derivatives to international investors, achieving a coordinated open layout of spot and derivatives markets. Promoting deeper coordination of regulatory frameworks and leveraging digital settlement infrastructure can make investing more convenient and secure for global investors. "Through continuous improvement of the institutional framework and expansion of opening-up, RMB bonds will further evolve from an 'optional asset' in global portfolios to an indispensable 'core holding,'" Pong said.

Lin Chunhui recommended continuing to strengthen protection of bond investors' interests, improving bond market information disclosure systems and legal frameworks for bond default resolution, enhancing the quality of domestic credit ratings, and advancing the convergence of accounting standards with international norms to increase the appeal of credit bonds to offshore investors.

"With the continuous development of China's bond market, electronic trading will become an important trend. Electronic trading in the bond market helps improve trading efficiency, reduce transaction costs, and increase trading transparency, which will attract more investors into the market," Lin said.