Paul Chan, Hong Kong's Financial Secretary, stated on August 3rd during the listing ceremony for China Treasury bond futures at the Hong Kong Exchanges and Clearing Limited that foreign investors establishing long-term positions in China require highly effective risk management tools. The treasury bond futures launched today provide a standardised, on-exchange, tradable, and priceable offshore hedging instrument for Chinese government bonds.
Combined with the interest rate swap connect, the treasury bond futures create a more comprehensive risk management framework for offshore renminbi fixed-income products. Chan noted that in the first half of this year, China's total goods trade imports and exports exceeded 25 trillion renminbi, a year-on-year increase of approximately 17%, setting a new historical high. Sectors such as new energy, artificial intelligence, and chip manufacturing are accelerating the formation of globally influential industrial clusters. This growth in trade and industry drives substantial cross-border renminbi transactions and usage scenarios, as well as the demand for renminbi management in the offshore market.
Additionally, geopolitical tensions and an uncertain external market environment are further increasing the demand from both domestic and international investors for long-term holdings of renminbi assets. The Bond Connect program is the primary channel for foreign investors to enter the mainland bond market, accounting for approximately two-thirds of total trading share. As of the end of June this year, the scale of Chinese bonds held by investors through this channel exceeded 3 trillion renminbi, nearly three times the size at the program's inception nine years ago.
He emphasised that the 15th Five-Year Plan clearly outlines the goal of accelerating the construction of a financial powerhouse, which includes having a strong currency that is widely used in international trade, investment, and foreign exchange markets, and holds global reserve currency status. The combination of the interest rate swap connect and treasury bond futures completes the risk management system for offshore renminbi fixed-income products. The accelerated internationalisation of the renminbi requires a robust offshore payment and settlement system, as well as a thriving ecosystem of investment products and risk management tools, forming a more complete yield curve and market depth.
After years of continuous development, Hong Kong has built a solid foundation in four key areas. First, a stable offshore renminbi liquidity pool, currently exceeding 1.1 trillion renminbi. Second, an efficient settlement system, now processing nearly 48 trillion renminbi per month. Third, a steadily expanding dim sum bond market, with annual issuance exceeding 1 trillion renminbi over the past two years and outstanding volume surpassing 1.6 trillion renminbi. Fourth, the demonstration effect created by the central government's issuance of renminbi treasury bonds in Hong Kong, with cumulative issuance now exceeding 440 billion renminbi.
The listing of treasury bond futures also carries another important strategic significance for Hong Kong. To consolidate and enhance its status as an international financial centre, Hong Kong must pursue more diversified development, not only as a centre for fundraising but also as a centre for pricing, risk management, and asset allocation. Treasury bond futures precisely enhance Hong Kong's functions and advantages in these areas. By deepening connectivity programs, Hong Kong's role will further upgrade from "connecting mainland and international markets" to a hub for "two-way allocation and two-way risk management."
In the process of renminbi internationalisation, Hong Kong has consistently served as an efficient offshore platform and hub. The goal is to make this offshore market more accessible, stable, deep, and robust, ensuring products and services are more closely aligned with the country's development needs. This will also enable international investors to participate more efficiently in the nation's steady development. The official launch of treasury bond futures marks the culmination of past efforts and signifies another milestone in serving the country's development needs.
Promoting renminbi internationalisation and building the offshore renminbi market is never a short-term endeavour. It requires unwavering commitment and sustained effort over time. Hong Kong has the responsibility and, more importantly, the confidence to work with all market participants to walk this path steadily, far, and deep, contributing Hong Kong's strength to the construction of a financial powerhouse.