PBoC and HKMA Enhance Swap Connect to Boost Mainland Financial Market Access

The People's Bank of China (PBoC), the Hong Kong Securities and Futures Commission (SFC), and the Hong Kong Monetary Authority (HKMA) have announced plans to expand the Swap Connect scheme, aiming to further open Mainland China's financial markets. This initiative follows the successful launch of the mutual access scheme between the Mainland and Hong Kong interest rate swap markets on May 15, 2023, which has seen significant growth in transaction volumes, according to the Hong Kong Monetary Authority.

Enhancements to Swap Connect

Swap Connect, initially designed to facilitate offshore institutional investors' access to the Mainland's interest rate swap markets, will see its product offerings expanded. The enhancements include extending the tenor of interest rate swap contracts to 30 years, addressing diverse risk management needs. Additionally, the product scope will widen with the inclusion of interest rate swap contracts utilizing the Loan Prime Rate (LPR) as a reference rate.

The decision to enhance Swap Connect is based on operational feedback and aims to promote the development of financial derivatives markets both in the Mainland and Hong Kong. As of April 2025, the scheme had facilitated over 12,000 transactions with a cumulative notional value of approximately RMB 6.5 trillion, involving 20 Mainland dealers and 79 offshore investors.

Strategic Goals and Market Impact

The strategic expansion of Swap Connect is part of a broader national strategy to steadily advance the opening-up of Mainland's financial markets. By enhancing the scheme, regulatory authorities aim to increase the attractiveness of RMB assets to offshore investors, thereby supporting RMB internationalization and bolstering Hong Kong's status as a global financial hub.

Regulatory bodies from both the Mainland and Hong Kong will continue to guide financial market infrastructure operators, ensuring that the enhancements are implemented effectively. The ongoing development of Swap Connect is expected to facilitate a steady, orderly, and sound progression in the internationalization of China's financial markets.

Future Prospects

Looking ahead, the PBoC, SFC, and HKMA remain committed to providing the necessary regulatory guidance to support the successful implementation of these enhancements. The aim is to strengthen the collaborative development of financial markets across the Mainland and Hong Kong, ensuring a robust framework for future financial innovations and opening opportunities for global investors.