Hong Kong — The launch of Bond Connect has led RMB internationalization to a new phase, where international financial institutions can begin to use RMB to manage their balance sheet, Hong Kong Exchanges and Clearing Limited (HKEX) Chief Executive Charles Li said on June 12.

Li made the remarks in his opening speech at HKEX’s 5th Annual RMB Fixed Income and Currency (FIC) Conference. He said cross-border trading in RMB through Stock Connect (the Shanghai-Hong Kong and Shenzhen-Hong Kong stock connect programs) has been a key catalyst to increasing the use of RMB as an investment currency.

Bond Connect refers to the mainland-Hong Kong bond connect program which was approved in May last year, allowing investors from both sides to trade bonds on each other’s interbank markets. “Northbound” trade, which allows Hong Kong and international investors to buy bonds issued on the mainland, started in July last year.

There are also three key stages along the path to internationalization, according to Li.

In the early phase, the RMB was mainly accepted as a trade settlement currency and people were concerned about the currency rate, and then, investors started to use RMB for RMB-denominated investments in the second phase, and Stock Connect has facilitated that, he said.

“The launch of Bond Connect has led to the third phase, where international financial institutions can begin to use RMB to manage their balance sheet. We are early in the third phase, so more work needs to be done,” he noted.

In 2014 and 2016, the Shanghai-Hong Kong and Shenzhen-Hong Kong stock connect programs were made available to domestic and overseas investors.

HKEX’s 5th Annual RMB Fixed Income and Currency (FIC) Conference attracted about 700 market participants, regulators and service providers to discuss the latest trends in the FIC market and how to push RMB internationalization forward.