Bond market integration: The Chinese Mainland and Hong Kong

This paper seeks to examine the integration of the evolving bond markets in the Chinese Mainland (CM) and Hong Kong (HK). To tap the international pool of capital, the CM government and CM enterprises have issued foreign currency bonds in HK and other developed markets. Since 1998 offshore CM bonds offered to the public have not been denominated in HK dollars probably because of concerns over the stability of HK's linked exchange rate and the differential credit ratings of the two economies. Even though HK has become increasingly well equipped to handle the clearing, settlement and custody of local and foreign currency bonds across its borders, it needs to continue to lobby for and attract CM government and corporate issues of foreign currency bonds (and Rmb bonds, if this were to be permitted) if it is to establish itself as a regional bond centre in Asia.