Hong Kong Maps Its Route to Offshore Renminbi & Precious Metals Leadership

Hong Kong’s capital markets are poised for further growth and ever closer integration with Mainland China under the city’s first five-year-plan announced in September.

The plan commits to improving the depth, breadth and liquidity of the equity and bond markets, helping Mainland Chinese enterprises go global and bringing in international capital. It also aims to make the listing regime more competitive and market infrastructure more efficient.

A central goal is to reinforce Hong Kong’s position as the world’s largest offshore renminbi business hub. Measures include a new offshore renminbi liquidity mechanism, regular dim sum bond issuance by high-grade issuers, wider use of renminbi bonds as collateral, and incentives for more listed companies to add renminbi counters under Southbound Stock Connect, the link that lets Mainland investors trade eligible Hong Kong-listed shares.

“The ambitious series of announcements aims to attract businesses to establish or expand their presence in Hong Kong, drawn by the mix of investment opportunities and financial incentives,” says founder Timothy Loh. “They also seek to more closely join international and domestic Chinese capital markets, part of a slow but steady effort to make the renminbi more widely traded globally.”

Bond trading and Connect changes

The plan and related policy address pledge to encourage more Mainland institutions to invest in Hong Kong’s bond market and to widen the channels and volumes of the various connects between the two markets. These include enhancements to existing Stock Connect, Bond Connect, and Wealth Management Connect to enable more financial products to be sold into each jurisdiction. Among the proposals:

• Mainland insurance funds will be encouraged to invest in Hong Kong ETFs through mutual market access.
• An Offshore RMB Bond Index will be created to serve as a market reference and as an underlying index for ETFs, to be listed on the Hong Kong stock exchange.
• The Hong Kong Monetary Authority (HKMA) will introduce a tender mechanism for seven-day offshore renminbi liquidity and explore short-term offshore renminbi debt instruments to support a yield curve.
• A new Mainland interbank reference rate will be introduced in the fourth quarter to help global investors manage renminbi interest rate risk.
• The Southbound Bond Connect will be expanded to products with Hong Kong dollar and renminbi bonds as underlying assets. In addition, a repo business using Southbound Bond Connect bonds as collateral will be developed, and Northbound Bond Connect bonds will be accepted as collateral at the Hong Kong exchange operator’s three clearing houses.

Infrastructure is also on the list, with the operator of the Bond Connect building an electronic fixed income and currency trading platform, starting with bonds and later covering money market and foreign exchange trading.

These changes should deepen renminbi liquidity in Hong Kong, draw in new products and widen asset allocation choices for investors and corporate treasuries keen to better invest their renminbi cash holdings. Separately, the government is preparing a bill, expected in the first half of 2027, to give pre-approved corporate treasury centres additional tax benefits.

Securities and commodities trading ambitions

Equity and commodity trading is also set for a number of changes, with IPO fundraising having passed HK$340 billion ($43 billion) by the end of August, already more than all of 2025. Against that backdrop, the Policy Address sets out:

• A second-stage consultation, starting in the third quarter, on rules for notifiable transactions, connected transactions and spin-offs, intended to cut compliance costs for listed companies.
• A 2027 consultation on streamlining prospectus disclosure, and a push for dual primary and secondary listings of overseas companies, including from Southeast Asia and Belt and Road countries.
• Hong Kong Exchanges and Clearing (HKEX) preparations for T+1 cash settlement in coordination with Mainland counterparts.
• Better margin arrangements across clearing houses and a wider range of eligible non-cash collateral and lower related fees.

The plan also names gold as the entry point for a commodity trading ecosystem, covering clearing, storage, supply and infrastructure, with the aim of a one-stop storage, trading, clearing and service hub, and explores renminbi-denominated gold and commodity markets and closer cooperation with the Shanghai Gold Exchange and Shanghai Futures Exchange. Specifically, the Policy Address states:

• A central clearing and settlement system for gold will launch in the first quarter of 2027, and HKEX will announce details of renminbi-denominated, physically settled gold futures this year.
• The HKMA is exploring larger Exchange Fund gold holdings, participation in spot and futures markets, and moving its physical gold to designated vaults.
• A dedicated Gold Hotline will support Mainland and overseas traders.

For base metals, Hong Kong’s storage area in the London Metal Exchange’s warehouse network now exceeds 60,000 square metres, and more LME-approved warehouses are planned for the Northern Metropolis. The clearest tax incentive is a tax concession for physical commodity trading, with consultation next year on concessions for wider gold and commodity activities.

“Clearly, Hong Kong’s goal is to become a major international precious metals trading hub with price-setting capabilities,” says Gavin Cumming, Partner and Head of London at Timothy Loh. “This is another indicator that Hong Kong is serious about being a world leader in financial services.”