Another milestone in the interconnection of financial markets between the two places——
Hong Kong and Mainland “Swap Link” will be launched
Our reporter Wang Lingxi and Qiu Haifeng “People’s Daily Overseas Edition” (Page 04 on July 6, 2022)
On July 4, the People’s Bank of China, the Hong Kong Securities and Futures Commission (SFC), and the Hong Kong Monetary Authority (HKMA) issued a joint announcement to carry out cooperation on the interconnection of interest rate swap markets between Hong Kong and the Mainland (hereinafter referred to as the Hong Kong Monetary Authority). “Swap Connect”) to promote the common development of the mainland and Hong Kong financial derivatives markets. From the perspective of mainland experts and the Hong Kong financial community, the “Swap Link” is another important milestone in deepening the interconnection between the mainland and Hong Kong financial markets. The release of this new financial policy will further promote the internationalization of the RMB, promote the common development of the financial derivatives markets in the Mainland and Hong Kong, effectively consolidate Hong Kong’s status as an international financial center, and enhance investor confidence.
Expand the opening of the mainland financial market
According to the relevant person in charge of the People’s Bank of China, in recent years, my country’s inter-bank bond market has been increasingly opened to the outside world. The latest data shows that as of the end of May this year, there were 1,038 foreign institutions entering the inter-bank market, covering more than 60 countries and regions such as the United States, Canada, the United Kingdom, France, Germany, Italy, Japan, Singapore, and Australia. The scale of my country’s bonds is 3.74 trillion yuan, an increase of 2.81 trillion yuan compared with that before the launch of Bond Connect. As foreign investors’ debt holdings expand and their trading activity increases, their demand for using derivatives to manage interest rate risk continues to increase.
Wang Youxin, a senior researcher at the Bank of China Research Institute, believes that the “Swap Connect” draws on the mature experience and overall framework of the bond market’s opening to the outside world, connects with the latest development trends of the overseas derivatives market, and optimizes the current situation with electronic transactions and central counterparty clearing as the core. There is a process to improve the efficiency of transaction clearing.
“‘Swap Connect’ uses RMB interest rate swap as a pilot product, and connects the financial market infrastructure of the two places, enabling domestic and foreign investors to easily and conveniently without changing their trading habits and effectively complying with the relevant market laws and regulations of the two places. Complete the transaction and centralized clearing of RMB interest rate swaps.” Analysis of E Zhihuan, Chief Economist of BOC Hong Kong.
Hong Kong Stock Exchange Group CEO Ou Guansheng predicted that, just as “Shanghai-Hong Kong Stock Connect”, “Shenzhen-Hong Kong Stock Connect” and Bond Connect have changed the genes of the stock and fixed income markets in the mainland and Hong Kong, “Swap Connect” will also change the inter-bank derivative products The face of the market. “The ‘Swap Link’ will facilitate the management of mainland-related investments by international investors and promote the further development of the mainland’s capital market.” Ou Guansheng said.
Further promote the internationalization of RMB
Wang Youxin analyzed to reporters that the interest rate swap business is an important interest rate risk management tool. Among them, the introduction of central counterparty clearing institutions can effectively reduce the risk of contract counterparties, reduce the risks caused by information asymmetry among domestic and foreign settlement participants, and improve the efficiency of capital use.
Pan Gongsheng, deputy governor of the People’s Bank of China and director of the foreign exchange bureau, pointed out that effective risk prevention is the basis for the high-quality development of the financial derivatives market, and it is also the core principle adhered to in the promotion of “swap” work. In order to ensure the order of transactions and control the overall risk of the market, the “Swap Connect” adopts the trading model of quotation agencies to play the role of the quotation agencies in stabilizing the market; Investors risk management needs while guarding against market risks.
Yu Weiwen, President of the Hong Kong Monetary Authority, said that Hong Kong has always been an important “testing ground” for the opening up of the mainland’s financial sector to the outside world, and a number of breakthrough “pioneering” measures have been launched here. Personal RMB banking business was launched in 2004; dim sum bonds were issued for the first time in 2007; the first RMB cross-border trade settlement was completed in 2009; the RMB Qualified Foreign Institutional Investor Program was launched in 2011; Through the “Northbound Link”, the Bond Connect “Southbound Link” and the Guangdong-Hong Kong-Macao Greater Bay Area “Cross-Border Wealth Management Link” will be launched in 2021. The interconnection mechanism between Hong Kong and the Mainland financial markets has been continuously improved to deepen the financial market reform, opening and The development of Hong Kong’s international financial center has injected new vitality and energy.
Yu Weiwen said, “In the process of RMB internationalization, Hong Kong has always played a unique and irreplaceable role.” The national “14th Five-Year Plan” clearly supports Hong Kong in strengthening the global offshore RMB business hub, international asset management center and risk management center function, deepen and expand the interconnection between the mainland, Hong Kong and Macao financial markets.
The Financial Secretary of the Hong Kong Special Administrative Region Government, Chen Maobo, said that the “Swap Connect” will help promote the common development of the financial derivatives markets in the Mainland and Hong Kong, provide investors with more options for risk management tools, and enhance the ecosystem of derivatives products in the two places. In addition, the “Swap Connect” is conducive to building Hong Kong’s offshore RMB market and consolidating Hong Kong’s status as an international financial center and a global offshore RMB business center.
Consolidate Hong Kong’s status as an international financial centre
“The ‘Swap Connect’ is another milestone in the integration of the mainland and Hong Kong financial markets. For the first time, the interconnection arrangement has been introduced in the financial derivatives field, making the financial market interconnection between the two places more comprehensive.” Chief Executive of the Hong Kong Special Administrative Region Li Jiachao said, “This will strengthen Hong Kong’s function as a global offshore RMB business hub and risk management center, and at the same time contribute to the high-level opening of the mainland’s capital market to the outside world.”
The People’s Bank of China stated that it will work with the Hong Kong Securities Regulatory Commission, the Hong Kong Monetary Authority and other departments to formulate institutional measures, strengthen regulatory cooperation and information sharing, guide relevant financial market infrastructure to prepare for rules, business, technology and other aspects, and strengthen market communication. Cultivate and guide market members to do pre-transaction preparations, and the project will be launched after 6 months. Initially, the “Northbound Link” was opened, that is, foreign investors from Hong Kong and other countries and regions participated in the mainland inter-bank financial derivatives market through the mechanism of interconnection between Hong Kong and mainland infrastructure institutions in terms of trading, clearing, settlement, etc. . In the future, timely research will be extended to the “Southbound Link”, that is, domestic investors can participate in the Hong Kong financial derivatives market through the interconnection mechanism arrangement between the infrastructure institutions of the two places.
E Zhihuan analyzed that after the launch of the “Swap Connect”, the differentiated investment demand of overseas institutions has increased, which will help improve market liquidity and “enhance Hong Kong’s attractiveness as an international financial center.”
“The implementation of the ‘Swap Link’ and the standing currency swap arrangement will further enhance the efficiency of connecting the financial markets of the two places and consolidate Hong Kong’s status as an international financial center and an offshore RMB business hub.” Pan Gongsheng said that these two policy measures are sufficient It reflects the great importance the Central Government attaches to consolidating and enhancing Hong Kong’s status as an international financial center, as well as the confidence and determination of the Central Government to support Hong Kong’s long-term prosperity, stability and development.
Wang Linggui, deputy director of the Hong Kong and Macau Affairs Office of the State Council, said that from bond connect to “swap connect”, there will be more and more channels for interconnection between the mainland and Hong Kong. With the joint efforts of all parties, it is believed that Hong Kong’s unique advantages and role will only be strengthened. , will not weaken, Hong Kong’s tomorrow will definitely be better.
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责编：张璋 ]