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Jul 04

Does China/Hong Kong Connect Bond link hint at greater investor access?

To say that the Chinese economy has been doing ok for itself over the past 15 years would be an understatement of huge proportions. However, it has become a global economic superpower by ploughing its own furrow, remaining closed to investors and retaining strict control of its currency.

Now, though, a new Chinese bond deal with Hong Kong points to a country prepared to start to lower restrictions for overseas investors.

Bond Connect gives investors access via Hong Kong financial institutions to China’s interbank bond market. It is the world’s third largest at $9.4 trillion in value but international investors own less than 2% of it. Bond Connect follows similar Stock Connects that already run between the two countries.

Bond Connect does away with onerous requirements for outsiders and eases worries about taking profits out of China, but downsides include worries about the depreciating yuan and reliability of China’s domestic credit rating agencies.

For years, organisations such as UKTI have been encouraging UK businesses to forge links with China, but doing so has never been easy in theory, and arguably even harder in practice.

Since the outcome of the Brexit referendum, China has naturally been identified as a very strong potential non-EU business ally, and diplomatic work has already been taking place to build stronger relationships between the two countries.

For years, it felt as if the trade was very much one-way – China basically selling goods and materials to the west and not much going in the other direction. Even as those matters have improved over the years – especially with premium brands such as Jaguar selling well in China – investor access has remained low.

In addition, this new announcement reinforces Hong Kong’s hand as a major global financial centre. With focus on the challenges faced by the City of London around Brexit, Hong Kong will welcome any opportunity to strengthen its own position.

Now, though it seems there has never been a better time to consider beginning trade with China. Many of Business Travel’s biggest customers already use us to arrange travel to and from China for major trade deals, or for market research, product development and opportunity spotting.

If you are considering developing trade links with China, or perhaps you are already doing so but want your business travel arrangements to be handled more effectively, for less, then we’d love to hear from you so we can discuss how we can help.