(July 7): China’s central bank announced a slew of measures aimed at expanding an investment channel between Hong Kong’s financial market and the mainland, as well as enhancing the city’s role in promoting overseas use of the yuan.
The total size of the so-called RMB Business Facility will more than double to 500 billion yuan (US$74 billion or $95.04 billion), giving local banks greater access to the Chinese currency in the form of loans from the Hong Kong Monetary Authority, according to Pan Gongsheng, governor of the People’s Bank of China.
Regulators are also boosting the quota of another programme, called the Southbound Bond Connect, which allows mainland institutional investors to buy offshore bonds through Hong Kong. Its annual limit will increase to 800 billion yuan from 500 billion yuan, Pan said in a speech Tuesday at the Hong Kong FIC & Bond Connect Summit.
The new policies are strengthening Hong Kong’s position as a gateway for foreign investors looking at China. They are also in line with Beijing’s campaign to build a more comprehensive cross-border trading and financial infrastructure to boost the yuan’s international appeal.
Pan highlighted Hong Kong’s status as the biggest offshore yuan market in the world, and forecast the city will play a bigger role in promoting the globalisation of the Chinese currency.
“As the global monetary system accelerates its evolution toward a multi-polar one, international demand for yuan is extending beyond trade settlement to broader areas including investment, financing, pricing and reserves,” said Pan. “Hong Kong’s role as the global offshore yuan hub will certainly be enhanced.”
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Pan also said the PBOC will support the launch of more commodity products priced in yuan, as Hong Kong began a trial operation of a new gold clearing system backed by several major banks. China’s central bank will keep increasing the allocation of national foreign reserves to Hong Kong, he added.
Pan offered relatively sparse remarks on China’s monetary policy, saying the central bank will maintain its supportive stance.
China’s economy has slowed significantly since April, with retail sales and fixed-asset investment falling at a pace unseen since the pandemic.
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While the slowdown is adding urgency for policymakers to step up support, the central bank has acted with restraint in easing monetary policy. It hasn’t cut the policy interest rate or banks’ required reserves since May 2025, at the height of the US-China trade war.
Policymakers last week quietly set the rate of a new overnight liquidity tool at a level lower than expected, potentially a sign they want borrowing costs to fall while reserving outright rate cuts for emergency situations.
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