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Chinese Premier Confirms Hong Kong Bond Connect Plans

by Mary Swire, Lowtax.net, Hong Kong
16 March, 2017

Chinese Premier Li Keqiang has announced plans to establish a "Bond Market Connect" between the Mainland and Hong Kong this year.

Speaking on March 15, 2017, he said the proposal would allow overseas capital to better access China's bond market. At present, foreign retail investors from both the Mainland and Hong Kong can invest only indirectly in their counterpart's bond markets through certain registered funds or through Hong Kong bond funds under the Mainland-Hong Kong Mutual Recognition of Funds (MRF) scheme.

The Bond Market Connect was proposed in November 2016 in a report released by Hong Kong's Financial Services Development Council (FSDC). The report studied the possibility of establishing a mechanism to allow mutual access for both Mainland and Hong Kong retail investors to each other's bond market.

The FSDC report also suggested that specific procedures for the Bond Connect scheme would be required in both the Mainland and Hong Kong to address how tax rules are applicable to investors under the scheme. For example, a withholding system will need to be established in the Mainland for bond interest payable to foreign investors so as to create an efficient tax compliance and collection platform.

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