The People’s Bank of China — the country’s central bank — is to focus on four key areas to support Hong Kong’s development as an international financial center, with the annual investment quota for the southbound Bond Connect to be increased from 500 billion yuan ($73.5 billion) to 800 billion yuan.

The steps include deepening market connectivity, diversifying market development, consolidating the special administrative region as a premier offshore renminbi hub, and protecting financial security, PBOC Governor Pan Gongsheng told the Hong Kong Fixed Income and Currency & Bond Connect Summit in Hong Kong on Tuesday.

The summit, organized by the Hong Kong Monetary Authority, the Securities and Futures Commission, Hong Kong Exchanges and Clearing and Bond Connect Company, focuses on what kind of opportunities the evolving global FIC landscape can bring to the city’s bond market ecosystem.

“Regarding deepening market connectivity, the new measures will cover extending southbound bond connect trading to be included in the repurchase program, expanding the product range to Hong Kong dollar bond and renminbi bond-related products, and radiating the connectivity program to the Macao market,” Pan said.

He said the scope of renminbi bonds as eligible collateral in the offshore market will be expanded to enrich the product lines of renminbi-denominated financial products in hedging, risk management and investment.

ALSO READ: HK starts trial run for gold central clearing operation

The PBOC chief pledged support for building a comprehensive financial trading platform in the SAR. “We have guided the China Foreign Exchange Trade System to cooperate with the HKMA and the SFC to support the Bond Connect Company to upgrade itself to become an important financial market infrastructure in Hong Kong, providing infrastructure services for trading in financial markets such as bonds, currencies, and foreign exchange.”

“In the next stage, the PBOC will work closely with market demand to make Hong Kong’s financial market more diversified. Hong Kong will be an international hub for asset and wealth management. This includes the upcoming launch of five-year offshore renminbi government bond futures to facilitate risk management in the offshore market,” Pan said.

Against the backdrop of escalating global interest-rate and inflation volatility, Chinese bonds, with their relative stability and low volatility, have continued to attract allocation demand from international investors, offering a rare development opportunity for Hong Kong’s bond market.

“Coupled with lower renminbi financing costs, Hong Kong can seize this favorable opportunity to attract more sovereign wealth and international companies to issue bonds and raise funds in the city. In the past year, bonds in multiple currencies, including Hong Kong dollars, US dollars, euros and Japanese yen, have developed steadily. The outstanding amount of dim sum bonds has exceeded two trillion yuan, the number of relevant issuers has gone up, and market liquidity has continued to improve,” Pan said.

The country’s foreign exchange reserves will continue to increase its asset allocation proportion to Hong Kong assets, he added.