KPMG China consultant Li Huiqiong suggested: Accelerate the implementation of government bond futures in the Hong Kong market

On March 10th, a reporter from The Paper learned that during this year's National Two Sessions, Li Huizhong, a member of the Standing Committee of the National People's Congress, Chairperson of the Legislative Council of the Hong Kong Special Administrative Region, and a consultant at KPMG China, suggested supporting Hong Kong in developing an offshore RMB bond market to further assist in the internationalization of the RMB. Li Huizhong stated that, firstly, it is essential to support the "normalization and predictability" of the supply of offshore RMB bonds and policy financial bonds to enrich the market ecosystem. In this regard, it is suggested to further increase the issuance of offshore RMB bonds and policy financial bonds in Hong Kong and establish a "normalization and predictability" issuance mechanism. "A stable supply mechanism helps enhance market liquidity, improve the offshore RMB benchmark yield curve, and provide reliable pricing benchmarks for the market," Li Huizhong further pointed out. "At the same time, it is suggested to introduce relevant preferential policies to encourage high-quality enterprises (especially Chinese-funded enterprises) to issue RMB bonds in Hong Kong and list them on the Hong Kong Stock Exchange, enriching the term structure and product variety of the offshore RMB bond market to meet the diversified asset allocation needs of global investors." Secondly, it is necessary to optimize and expand the connectivity mechanism to enhance cross-border risk management efficiency. It is suggested to further optimize the "Swap Connect" mechanism and expand it in a timely manner to enrich the tradable varieties. At the same time, efforts should be made to improve the relevant clearing micro-mechanisms, reduce transaction costs, and enhance settlement efficiency. Li Huizhong suggested further leveraging Hong Kong and the Hong Kong Stock Exchange's functions in the "Bond Connect Southbound" business, working with regulatory agencies to refine and improve the standards and tracking of eligible bonds, providing a risk-controlled and compliant efficient channel for mainland funds to "go out." Furthermore, it is crucial to accelerate the promotion of key risk management tools such as government bond futures and improve the product chain. "It is suggested that regulatory authorities accelerate the introduction of offshore RMB government bond futures and other key risk management tools in Hong Kong." "Government bond futures, as an important interest rate hedging tool, can form a closed loop with existing interest rate and foreign exchange clearing services, constructing a complete offshore RMB risk management product system. At the same time, it is suggested to introduce supporting policies to encourage Chinese-funded banks and other financial institutions to effectively participate in the Hong Kong futures market, playing their role as market stabilizers and enhancing the depth and breadth of the market," Li Huizhong said. Finally, support the development of the cross-border repurchase market and centralized repurchase clearing to activate existing assets. It is suggested to support Hong Kong in vigorously developing the cross-border repurchase market and promote the Hong Kong Stock Exchange to establish a "centralized repurchase clearing" mechanism. Li Huizhong explained that this mechanism will effectively enhance the capabilities of domestic market makers and activate the RMB bond assets held by overseas investors, driving the improvement of secondary market liquidity and stabilizing the supply of offshore RMB. This will significantly enhance Hong Kong's hub function in international RMB bond and derivative trading, consolidating its position as a global pricing and risk management center for offshore RMB assets. At the same time, regarding talent development, Li Huizhong also suggested building a global talent hub in the Guangdong-Hong Kong-Macao Greater Bay Area from four aspects: first, building platforms to allow top talents to showcase their skills, hoping that the talent policy in the Greater Bay Area focuses on "building good platforms to attract talent." Second, focusing on cultivating local talent, suggesting piloting in the Greater Bay Area to promote the integrated development of education, technology, and talent, and laying out emerging disciplines in advance. Third, breaking through "industry-academia-research" barriers to make innovative talents more vibrant "Fourth, it is recommended to establish a funding channel for purchasing housing for professional talents to provide support for retaining talent. It is suggested to refer to the 'connectivity' mechanism of the financial market to provide a special housing purchase channel for mainland talents settling in Hong Kong, allowing eligible mainland talents to purchase properties in a closed loop to solve their housing issues," Li Huiqiong pointed out