(Yicai Global) Sept. 16 -- China will open a bond connect channel on Sept. 24 to help mainland-based investors trade offshore debt via Hong Kong.

Launching the Southbound Bond Connect with the Hong Kong Special Administrative Region should improve the institutional arrangements for the two-way opening-up of China’s bond market, the People’s Bank of China and the Hong Kong Monetary Authority jointly announced yesterday.

The program should further expand the space for domestic investors to allocate assets in the international financial market, the PBOC wrote in a statement on its website yesterday.

The link targets certain investors. Some 41 mainland banks and participants in the Qualified Domestic Institutional Investor and Renminbi QDIIs schemes are expected to take advantage of the new trading infrastructure.

Trading has a ceiling. For now, the daily quota is CNY20 billion (USD3.1 billion) and the annual figure is set at CNY500 billion (USD77.7 billion) but the PBOC may adjust the limits based on cross-border capital flows.

The move is predicted to be beneficial to the SAR. The Southbound Bond Connect aims to consolidate Hong Kong’s position as a node connecting the mainland with the global market, helping the SAR integrate with China’s general development while maintaining Hong Kong's long-term prosperity and stability, the PBOC added.

The program adds a counterpart to an existing northbound channel. Launched in July 2017, the Northbound Bond Connect allows foreign investors to access China's mainland bond market.

The northbound leg has become popular among overseas investors. Before it, foreign investors held about CNY850 billion worth of Chinese bonds. The scale has reached CNY3.8 trillion (USD590.4 billion) so far, with an average annual growth rate exceeding 40 percent, while CNY1.1 trillion of the sum is accessed via the Northbound Bond Connect.

In the past four years, some CNY12.3 trillion (USD1.91 trillion) worth of notes has exchanged hands via the older bond connect channel. Some 78 out of the world’s top 100 asset management institutions have participated in the program so far, according to the PBOC.

Editor: Emmi Laine, Xiao Yi