Bond Connect Southbound Trades Mark Fifth Anniversary: Custodied Bonds Exceed 1,000, Balance Surges Over 100-Fold

By Tang Jing, 21st Century Business Herald September 24, 2026

Five Years of Growth and Evolution

On September 24, 2026, the Bond Connect "Southbound Link" celebrated its fifth anniversary. Launched five years ago, the mechanism provided mainland institutional investors with a standardized channel to invest in the offshore bond market via Hong Kong, completing the two-way connectivity of Bond Connect.

Looking back, the mechanism has evolved significantly:

• Initial phase: Over 40 pilot institutions, primarily banks
• Current phase: A diversified cross-border allocation platform encompassing banks, securities firms, funds, insurance companies, and wealth management firms
• Annual net investment quota: Increased from RMB 500 billion to RMB 800 billion
• Functional role: Upgraded from a one-way "bond buying channel" to a comprehensive fixed-income allocation and liquidity management platform

Surge in Market Scale

The most visible change is in market size. According to Shanghai Clearing House data:

• As of end-September 2021: Only 35 bonds were held under the "Southbound Link" via financial infrastructure connectivity, with a balance of RMB 5.525 billion
• As of end-November 2025: The number of bonds held reached 1,053, with a balance of RMB 655.31 billion — a substantial leap in market volume

Key Insights from Industry Experts

Cheng Shi, Chief Economist at ICBC International, noted that before the "Southbound Link," mainland investors relied on RQDII to invest in offshore bonds, which offered limited flexibility and higher transaction costs. "Through the 'Southbound Link,' mainland investors can trade directly with Hong Kong market makers via the trading platform, keeping pace with global bond market trends and diversifying their investment targets."

"After five years of development, the 'Southbound Link' has become the primary channel for mainland investors to access offshore bonds, significantly improving the liquidity of the offshore renminbi bond secondary market and achieving two-way connectivity with the 'Northbound Link,' launched in 2017," Cheng added.

Wang Dahai, President of Bloomberg Greater China, said that as the "Southbound Link" continues to expand and optimize, investors will gain more diversified asset allocation options. This is expected to further enhance the depth and liquidity of Hong Kong's offshore renminbi bond market, promoting deeper connectivity between onshore and offshore renminbi bond markets.

Institutional Expansion and Quota Increase

The diversification of participants in the "Southbound Link" is accelerating:

• July 2025: The People's Bank of China (PBOC) expanded the scope of eligible mainland investors to include four types of non-bank institutions: securities firms, funds, insurance companies, and wealth management firms — the first time non-bank financial institutions were included
• Market makers: The Hong Kong Monetary Authority expanded its designated market makers from 13 to 22, further improving secondary market liquidity
• Late 2025: BOC Wealth Management, ICBC Wealth Management, and CMB Wealth Management became the first three pilot wealth management firms to qualify for "Southbound Link" trading
• End of May 2026: Bank of Communications Hong Kong Branch executed the first wealth management firm bond investment transaction under the expanded scheme with CMB Wealth Management
• June 2026: Six major insurers — China Life, PICC, China Taiping, CPIC, Ping An, and Taikang Insurance — were among the first to receive approval for "Southbound Link" bond investments. Insurance asset management firms such as China Life Asset Management, Ping An Asset Management, and Taikang Asset Management subsequently completed their first transactions

Core Value for Wealth Management Firms

A representative from BOC Wealth Management told the reporter that as a key channel for bank wealth management to allocate offshore renminbi assets, the "Southbound Link" offers three core benefits:

1. Diversifying fixed-income investment targets for domestic wealth management funds, enabling diversified allocation across onshore and offshore renminbi bond markets
2. Helping wealth management institutions build cross-border investment and research capabilities, creating differentiated product competitiveness
3. Enhancing liquidity in the offshore renminbi bond market, supporting two-way connectivity in the renminbi market

Insurance Sector Perspective

A senior executive from an insurance asset management firm participating in the "Southbound Link" noted that previously, insurance funds relied on QDII for offshore bond investment, which had limited quotas and required intermediaries. "Now, the 'Southbound Link' insurance account has independent quota management and is not counted toward the current 15% cap on total assets for offshore investment. This allows us to allocate offshore bonds directly, according to our own investment pace and risk appetite."

Key Policy Upgrades

July 2026: PBOC Governor Pan Gongsheng announced at the Hong Kong Fixed Income and Currency Summit and Bond Connect Forum:

• Annual net investment quota increased from RMB 500 billion to RMB 800 billion — a 60% rise
• "Southbound Link" bonds included in the scope of repurchase (repo) support
• Product scope expanded to include Hong Kong dollar bonds and renminbi bond-related products, extending to the Macau bond market

Many institutional investors view the inclusion in repo support as a more critical breakthrough than the quota increase. Previously, "Southbound Link" bonds could only be held as investment assets and could not be used for liquidity management. Under the repo framework, eligible offshore bonds can serve as qualified collateral, helping institutions reduce liquidity management costs and directly boosting secondary market trading activity in Hong Kong.

Lin Chunhui, Head of Fixed Income Portfolio Management for Asia Pacific at Invesco, noted that improving repo market infrastructure is a key part of optimizing the "Southbound Link" ecosystem. "Developing the repo mechanism helps enhance market liquidity, allowing eligible bonds to serve not only as investment assets but also as liquidity financing assets, thereby increasing the attractiveness of the offshore bond market to mainland investors."

Expansion of Dim Sum Bonds and Offshore RMB Market

From a broader perspective, these institutional arrangements go beyond optimizing a single mechanism. Ji Wencheng, Managing Director and Head of Treasury Trading at JPMorgan Chase Bank (China), told the reporter that the "Southbound Link" provides a legal and compliant channel for domestic funds to allocate offshore assets, helping to expand the offshore renminbi liquidity pool.

Ji noted that the "Southbound Link" facilitates domestic funds in providing liquidity support for Chinese enterprises issuing offshore bonds in Hong Kong, while also giving mainland investors more opportunities to allocate renminbi-denominated assets issued by various entities.

In his view, as bond two-way connectivity and mechanisms like "Swap Connect" mature, the linkage between offshore and onshore renminbi markets will continue to strengthen. Hong Kong will further consolidate its position as an international financial center and offshore renminbi business hub through various connectivity mechanisms.

Record-Breaking Dim Sum Bond Issuance

The expansion of the offshore renminbi liquidity pool is directly reflected in the surge of dim sum bond issuance — renminbi-denominated offshore bonds issued in Hong Kong, a key asset class for mainland institutions via the "Southbound Link."

Fitch Ratings data shows that from January to August 2026, dim sum bond issuance reached a record RMB 1.35 trillion.

Notable changes in issuer composition:

• First half of 2026: The core growth in the dim sum bond market came not from traditional financial institutions but from Chinese tech companies
• JD.com issued RMB 10 billion in dim sum bonds for the first time
• Kuaishou Technology issued RMB 3.5 billion in dim sum bonds for the first time
• Tencent issued RMB 15 billion in dim sum bonds in Hong Kong, setting a record for the largest global dim sum bond issuance since 2025

Future Outlook

Pang Ming, a member of the China Chief Economist Forum, said that over the past five years, the "Southbound Link" has gradually become an important bridge connecting onshore and offshore markets, effectively improving the liquidity of offshore renminbi bonds and boosting trading activity in dim sum bonds and other offshore instruments.

Looking ahead, Pang believes that as the offshore renminbi market deepens, the "Southbound Link" still has broad room for innovation and expansion:

• Product tools: Further enrich trading varieties, such as launching offshore renminbi government bond futures, green bonds, and more structured products
• Scenario expansion: Link the "Southbound Link" with cross-border renminbi settlement, Cross-Border Wealth Management Connect, and other mechanisms, integrating with cross-border fund centralized operations to form a more complete connectivity ecosystem

Policy Framework for Long-Term Development

From a longer-term perspective, the development of the offshore renminbi market has been clearly outlined at the policy level:

• "15th Five-Year Plan" (2026-2030): Explicitly calls for "developing the renminbi offshore market"
• Hong Kong SAR's first five-year plan: Proposes strengthening Hong Kong's functions as a global offshore renminbi business hub, international asset and wealth management center, and international risk management center, while optimizing the stock and bond markets
• September 16, 2026: Hong Kong SAR Chief Executive John Lee stated that Hong Kong will optimize its international bond market, improve Bond Connect, and continue to promote the optimization and expansion of the "Southbound Link" in terms of investment scale, investor scope, products, and trading arrangements