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Hong Kong-China Bond Connect Program Launches

by Mary Swire, Lowtax.net, Hong Kong
14 July, 2017

Hong Kong has launched its "Bond Connect" program with Mainland China, a mutual bond market access program between the two territories.

The program was launched on July 3, with the Northbound trading link opening to allow investors to invest in the China interbank bond market through Hong Kong. The Southbound trading link, allowing investors from China to invest in Hong Kong bond markets, will open at a later date.

"Bond Connect is a major breakthrough in the development of the China bond market, which is the world's third largest," said C K Chow, Chairman of Hong Kong Exchanges and Clearing Limited. "International investors will be able to use our link to trade directly with eligible dealers on the Mainland through platforms they have been using for other trading."

The Bond Connect was proposed in November 2016 in a report by Hong Kong's Financial Services Development Council (FSDC), following the introduction of the Stock Connect program for securities trading. The FSDC suggested that specific procedures would be required in both the Mainland and Hong Kong to address how tax rules are applicable to investors under the scheme. For example, it said a withholding tax compliance system would need to be established in the Mainland for bond interest payable to foreign investors.

However, no specific announcements have been made regarding such arrangements at this time.

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