It's equally important, though, that Li's reform team ensures that china follows through this time.Įarlier episodes of market opening saw Xi's government putting the proverbial cart before the horse. The plan, Li explained, is to“promote fair competition among various business entities and support the development and growth of private enterprises” and to“shore up” investor confidence. “From a new starting point, we will create a market-oriented, legalized and internationalized business environment, treat enterprises of all types of ownership equally, protect the property rights of enterprises and the rights and interests of entrepreneurs.” In March, for example, Li said that“for a period of time last year, there were some incorrect discussions and comments in the society, which made some private entrepreneurs feel worried. Since March, when he formally took over as Xi's No 2, Li seems to have hit the brakes on the tech company crackdown that in recent years has sent foreign capital fleeing. New Premier Li Qiang has signaled the former. Li Qiang is promising big market reforms. Yet the question is whether this time financial reforms will keep pace with rising investor optimism? Or will this be another episode of China over-promising and under-delivering? Now, Swap Connect rounds out Xi's regional ambitions. First it was Stock Connect, then Bond Connect. The reference here is to Xi's habit of connecting markets to Hong Kong's first-world system to increase China's financial street cred. Nicolas Aguzin, CEO of Hong Kong Exchanges and Clearing Limited, is absolutely right to call Swap Connect“the latest chapter in our 'connect' story.” Monish Tahilramani, head of Asia Pacific markets at HSBC, says the hedging tool marks“an important complement to Bond Connect and a positive sign that onshore markets continue to open up.” “Leveraging our cross-border strengths, we look forward to playing an active role in helping international investors get a head start via Swap Connect” and“helping accelerate the opening up of China's financial markets and RMB internationalization.” The program“will be a huge leap forward in developing the domestic derivatives and bond markets,” says Rose Zhu, chief China country officer at Deutsche Bank, which Beijing named as a key market maker for Swap Connect. It also reminds top investment banks that geopolitical turbulence between Beijing and Washington isn't getting in the way of market reforms. It turns the page, to some extent, from the regulatory crackdowns of 20. The move dovetails with a powerful bond rally driven by expectations that the central bank will add more liquidity this year.įor Chinese leader Xi Jinping, Swap Connect helps fulfill a pledge to open mainland capital markets to international funds. This will likely deepen institutional investors' involvement in China markets, building on the existing Bond Connect plan. The swap scheme will enable punters to deal in key money-market rates tied closely to People's Bank of China (PBoC) policies. The dearth of hedging tools has long turned off the biggest of the big money. It opens the way for overseas funds to access derivatives vital to hedging bets in China's bond market. Here, the new“Swap Connect” program between China and Hong Kong is wisely timed. Opening a recovering financial system to global investors hungry for growth and higher-yielding assets as the post-Covid-19 trade gains momentum. They include runaway inflation, failing Western banks, the specter of a US default and desperate attempts to woo global south countries. “Timely,” because it coincides with Group of Seven (G7) members heading to Hiroshima, Japan to contain any number of financial troubles. Yet what sounds like a rather technical turn of the screw is a huge and timely reform win for institutional investors keen on trading Asia's biggest economy. ( MENAFN- Asia Times) Beijing regulators are leaning into a seven-week rally in China's sovereign bond market by widening access to onshore interest-rate swaps.
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