Hong Kong's financial infrastructure is designed to cater for cross-border as well as domestic economic activities. Links with payment systems and debt securities systems in other economies provide an easily accessible payment and settlement platform for cross-border economic transactions and financial intermediation.
Links with Guangdong (including Shenzhen) - Launched in phases since January 1998, these links cover cross-border RTGS payments in Hong Kong dollars and US dollars, and cheque clearing in Hong Kong dollars, US dollars and renminbi, with Guangdong Province including Shenzhen1. The use of these links, which helps expedite payments and remittances between Hong Kong and Guangdong, has been rising gradually with the increasing economic integration between Hong Kong and the Mainland.
Cross-border payment arrangements with Mainland - Cross-border payment arrangements involving the Mainland's Domestic Foreign Currency Payment System were established in March 2009 to facilitate foreign currency funding and liquidity management of Mainland banks and commercial payments. The cross-border payment arrangements currently cover four currencies - the Hong Kong dollar, US dollar, euro and British pound.
Link with Macau - The one-way joint clearing facility for Hong Kong dollar and US dollar cheques between Hong Kong and Macau was launched in August 2007 and June 2008 respectively, reducing the time required for clearing Hong Kong dollar and US dollar cheques drawn on banks in Hong Kong and presented in Macau from four or five days to two.
Link with Malaysia - A link between the Ringgit RTGS system in Malaysia (the RENTAS system) and the US dollar RTGS system in Hong Kong came into operation in November 2006. The link helps eliminate settlement risk by enabling payment versus payment (PvP) settlements of foreign exchange transactions in ringgit and US dollars during Malaysian and Hong Kong business hours. This is the first cross-border PvP link between two RTGS systems in the region.
Link with Indonesia - The PvP link between Hong Kong's US dollar RTGS system and Indonesia's Rupiah RTGS system was launched in January 2010. The link helps eliminate settlement risk by enabling PvP settlements of foreign exchange transactions in Rupiah and US dollars during Indonesian and Hong Kong business hours.
Link with Thailand - The PvP link between Hong Kong's US dollar RTGS system and Thailand's Baht RTGS system was launched in July 2014. The link helps eliminate settlement risk by enabling PvP settlements of foreign exchange transactions in Baht and US dollars during Thailand and Hong Kong business hours.
Link with the Continuous Linked Settlement (CLS) system - The CLS system, operated by CLS Bank International, is a global clearing and settlement system for cross-border foreign exchange transactions. It removes settlement risk in these transactions by settling them on a PvP basis. The Hong Kong dollar joined the CLS system in 2004.
Regional CHATS - This is an extension of the RTGS systems in Hong Kong in the regional context. Regional payments in the Hong Kong dollar, US dollar, euro and renminbi can use the RTGS platform in Hong Kong to facilitate cross border/cross bank transfers in those currencies.
1Joint clearing for US dollar cheques is currently with Shenzhen only.
Bond Connect Linkage Service
On 16 May 2017, the People’s Bank of China (PBoC) and the HKMA jointly announced their approval for Mainland and Hong Kong Financial Infrastructure Institutions to collaborate in establishing mutual bond market access between Mainland China and Hong Kong under the scheme known as Bond Connect. Bond Connect is an arrangement that will enable Mainland and overseas investors to trade, settle and hold bonds tradable in the Mainland and Hong Kong bond markets through connection between the Mainland and Hong Kong Financial Infrastructure Institutions.
Bond Connect was implemented in phases and consists of a trading link and a settlement link. Under the settlement link of Northbound Trading (the initial phase of Bond Connect which was commenced on 3 July 2017), the Central Moneymarkets Unit (CMU) has opened nominee accounts with two Mainland central securities depositories (CSDs), namely the China Central Depository & Clearing Co., Ltd (CDCC) and Shanghai Clearing House (SHCH), to settle Northbound transactions and hold China Interbank Bond Market (CIBM) bonds on behalf of CMU members, whom in turn are providing services directly or indirectly to overseas investors using Bond Connect. Under Southbound Trading (the second phase of Bond Connect which was commenced on 24 September 2021), the Mainland CSDs have opened nominee accounts with CMU to settle Southbound transactions and hold CMU securities on behalf of eligible Mainland investors.
The CMU has developed a number of external links with regional CSDs and international CSDs. One-way inbound links from Euroclear and Clearstream, the two largest ICSDs in the world, to the CMU were set up in 1994 to allow international investors to hold and settle Hong Kong dollar debt securities through these international networks. The links became two-way in November 2002 (for Euroclear) and January 2003 (for Clearstream) to enable investors in Hong Kong and other parts of Asia to hold and settle Euroclear and Clearstream debt securities directly in a secure DvP environment.
The CMU also established links with CSDs in Australia in December 1997 and South Korea in September 1999. These links, in addition to facilitating cross-border holding and settlement of debt securities in Hong Kong and overseas, also enlarged the investor base, broadened the domestic debt markets, and reduced settlement risk by facilitating DvP settlement for cross-border securities transactions.
The HKMA and the CDCC signed an agreement in April 2004 to establish a link between the CMU and the Government Securities Book-entry System (GSBS) operated by the CCDC. This link enables authorised investors in Mainland China to hold and settle Hong Kong and foreign debt securities lodged in the CMU.
The CMU also established a link with the CSD in Taiwan during December 2012 to facilitate investors in Taiwan to hold and settle Hong Kong and foreign debt securities lodged in the CMU.
Following the launch of Mainland-Hong Kong Mutual Recognition of Funds (MRF) in the second half of 2015, which allows Mainland and Hong Kong recognised funds to be distributed in each other’s market, the CMU has linked up with transfer agents and fund houses in the Mainland including the China Securities Depository and Clearing Corporation Ltd (ChinaClear) to facilitate cross-border investment fund order routing services.