China considers doubling southbound bond connect to $139 billion

China considers doubling southbound bond connect to $139 billion

China is reportedly considering a significant expansion of its Southbound Bond Connect program, which could see the annual quota for non-bank financial institutions doubled to $139 billion. The proposal, which is still in the early stages of discussion, aims to loosen restrictions on financial flows and boost two-way market flows [1].

The Southbound Bond Connect program, launched in 2021, allows onshore investors to buy bonds listed on Hong Kong’s stock exchange. The proposed expansion would include an up-to 500 billion yuan ($139 billion) annual quota for non-bank financial institutions, which are currently excluded from the trading link. This move would enable Chinese investors, including mutual funds, to increase their exposure to international bonds tradeable through Hong Kong, including those denominated in dollars [1].

The expansion is part of a broader effort by Chinese regulators to promote the international appeal of the yuan. By opening up the market to more investors, China aims to address one of the main criticisms from yuan skeptics—that its capital controls limit the currency’s global appeal. The move could also stimulate demand for offshore yuan-denominated bonds, potentially boosting the dim sum market [1].

The People’s Bank of China and the Hong Kong Monetary Authority have held early talks about the expansion, but no final decisions have been taken yet. The proposal would need approval from relevant regulators before it could be implemented [1].

This latest move follows a series of recent financial market liberalizations, including the expansion of a cross-border payment system and the broadening of contracts that foreigners can trade. These measures are part of China’s broader strategy to challenge the dollar’s dominant role in the global trading system and promote a multi-currency global system [1].

The Southbound Bond Connect program operates in a closed-loop system, meaning investors cannot use the proceeds from selling bonds to invest elsewhere outside mainland China. The annual quota for the southbound link has been unchanged at 500 billion yuan since its launch in 2021 [1].

References:
[1] https://www.bloomberg.com/news/articles/2025-07-07/china-considers-doubling-southbound-bond-connect-to-139-billion