News Release
[Research Report] The RMB Bond Primary Market: Access Channels and New Initiatives
11 July 2022
The internationalisation of the bond market is an important step taken by China to facilitate the two-way opening-up of its financial market. The Mainland’s Renminbi (RMB) bond market, including both its primary and secondary markets, has been opened up to foreign investors and at the same time its offshore market has also become a main venue for international investors to trade or invest in bonds issued by Chinese institutions.
HKEX’s Chief China Economist’s Office and Bond Connect Company Limited Just jointly published a research report, which looks at the growth of China’s bond market and Chinese-issued USD bonds market, and examines how recent developments in Hong Kong’s financial infrastructure, such as ePrime, can further enhance the city’s fixed income market.
The Growth of China’s Bond Market and Chinese-issued USD bonds/Dim-Sum Bonds
Since 2010, China has introduced a number of measures to encourage foreign participation and investor diversification in the onshore bond market. The launch of Northbound trading under Bond Connect in July 2017 has provided new channels for offshore investors to invest in the Mainland bond market and has quickened the pace of internationalisation. At the end of September 2021, foreign holdings of RMB bonds reached RMB3.94 trillion, up 322% compared with the level before the launch of Bond Connect, and the percentage of foreign holdings has increased from 1.3% to 3.1% over the same period.
Alongside the further progress in the two-way opening-up of the Mainland bond market, the interaction between the onshore and offshore markets has also increased in both depth and breath. The offshore market has gradually become a key financing channel for domestic institutions and enterprises in the Mainland, with offshore Chinese-issued USD bonds and dim-sum bonds (i.e. RMB bonds issued overseas) becoming important China-related bond segments which offshore investors could take up at ease in their portfolio allocations. Total issue amount of Chinese-issued USD bonds reached US$1.47 trillion between 2010 and the end of October 2021.
ePrime at a glance
The new ePrime system that BCCL launched in October 2020 is one of the latest financial infrastructure systems to support the Hong Kong fixed income market. It is an electronic bond issuance system developed and operated by China Foreign Exchange Trade System (CFETS), offering a one-stop solution for the primary bond market across the issuers, underwriters and investors specialized in the China cross-border workflow. It has two components to cater issuance and subscription applications: ePrime global issuance service and ePrime Northbound primary service.
The launch of ePrime global issuance service in the offshore market is conducive to enriching the offshore market infrastructure services and is beneficial to exploring and enhancing cross-border bond issuances. It offers a platform for issuing, primary book building, pricing and allocation for offshore securities including US dollar-denominated bonds, Renminbi bonds, Hong Kong dollar bonds and other currencies. It has successfully supported various issuances from policy banks and commercial banks and onboarded 29 offshore underwriters.
ePrime Northbound primary service, launched recently on 4 July 2022, digitalises the subscription process in the primary market of Northbound Bond Connect through its linkage with the iDeal underwriting and distribution service, which is widely adopted by onshore market participants. iDeal is a compliant instant messaging tool launched by CFETS for the Chinese interbank market. It brings the whole process of bonds’ primary market underwriting and distribution online by launching these primary market services in 2022.
The connectivity initiative of ePrime and iDeal can further promote market development. The launch of innovative infrastructures is a milestone in the journey of building and developing bond financial infrastructures of international standards, as well as an important step in reinforcing Hong Kong’s role as an international financial centre and developing its fixed-income ecosystem.
* Click to read the full report: The RMB Bond Primary Market: Access Channels and New Initiatives
HKEX’s Chief China Economist’s Office and Bond Connect Company Limited Just jointly published a research report, which looks at the growth of China’s bond market and Chinese-issued USD bonds market, and examines how recent developments in Hong Kong’s financial infrastructure, such as ePrime, can further enhance the city’s fixed income market.
The Growth of China’s Bond Market and Chinese-issued USD bonds/Dim-Sum Bonds
Since 2010, China has introduced a number of measures to encourage foreign participation and investor diversification in the onshore bond market. The launch of Northbound trading under Bond Connect in July 2017 has provided new channels for offshore investors to invest in the Mainland bond market and has quickened the pace of internationalisation. At the end of September 2021, foreign holdings of RMB bonds reached RMB3.94 trillion, up 322% compared with the level before the launch of Bond Connect, and the percentage of foreign holdings has increased from 1.3% to 3.1% over the same period.
Alongside the further progress in the two-way opening-up of the Mainland bond market, the interaction between the onshore and offshore markets has also increased in both depth and breath. The offshore market has gradually become a key financing channel for domestic institutions and enterprises in the Mainland, with offshore Chinese-issued USD bonds and dim-sum bonds (i.e. RMB bonds issued overseas) becoming important China-related bond segments which offshore investors could take up at ease in their portfolio allocations. Total issue amount of Chinese-issued USD bonds reached US$1.47 trillion between 2010 and the end of October 2021.
ePrime at a glance
The new ePrime system that BCCL launched in October 2020 is one of the latest financial infrastructure systems to support the Hong Kong fixed income market. It is an electronic bond issuance system developed and operated by China Foreign Exchange Trade System (CFETS), offering a one-stop solution for the primary bond market across the issuers, underwriters and investors specialized in the China cross-border workflow. It has two components to cater issuance and subscription applications: ePrime global issuance service and ePrime Northbound primary service.
The launch of ePrime global issuance service in the offshore market is conducive to enriching the offshore market infrastructure services and is beneficial to exploring and enhancing cross-border bond issuances. It offers a platform for issuing, primary book building, pricing and allocation for offshore securities including US dollar-denominated bonds, Renminbi bonds, Hong Kong dollar bonds and other currencies. It has successfully supported various issuances from policy banks and commercial banks and onboarded 29 offshore underwriters.
ePrime Northbound primary service, launched recently on 4 July 2022, digitalises the subscription process in the primary market of Northbound Bond Connect through its linkage with the iDeal underwriting and distribution service, which is widely adopted by onshore market participants. iDeal is a compliant instant messaging tool launched by CFETS for the Chinese interbank market. It brings the whole process of bonds’ primary market underwriting and distribution online by launching these primary market services in 2022.
The connectivity initiative of ePrime and iDeal can further promote market development. The launch of innovative infrastructures is a milestone in the journey of building and developing bond financial infrastructures of international standards, as well as an important step in reinforcing Hong Kong’s role as an international financial centre and developing its fixed-income ecosystem.
* Click to read the full report: The RMB Bond Primary Market: Access Channels and New Initiatives