Chinese regulators have published new guidelines that would allow financial opening and innovation in the Greater Bay Area linking mainland China, Hong Kong, and Macau. The People's Bank of China (PBOC), China Banking and Insurance Regulatory Commission (CBIRC), the China Securities Regulatory Commission (CSRC), and the State Administration of Foreign Exchange (SAFE) jointly issued the guidelines for the piloting of investments.

According to the PBOC statement, it would support Hong Kong in matters related to developing risk management tools in its offshore yuan and commodity markets. The measure was said to strengthen the city's label as a global offshore Ren Min Bi (RMB) hub. The PBOC also seeks to promote the circulation of RMB across the Greater Bay Area, including overseas investment and lending by financial institutions in Guangdong, Hong Kong, and Macau.

The PBOC also aims to support capital pooling in foreign currencies that would facilitate cross-border participation of multinational market players. The guidelines provide that Hong Kong and Macau financial institutions, along with non-financial enterprises, would be allowed to issue financial and corporate bonds. These would also include debt financing instruments in China's mainland.

On top of this, the PBOC would test cross-border private equity and venture capital investments. It would also determine the viability of a future exchange in Guangzhou, and incorporate an international commercial bank that would operate within the Greater Bay Area.

In other news, Xinhuanet reported that the PBOC issued 30 billion yuan of bills in Hong Kong last Thursday. The 20 billion yuan would mature in three months, while the ten billion yuan would mature a year after. The interest rate stands at 1.77 and 1.78 percent, respectively.

The issuance was well-received by investors operating in offshore markets of many countries and regions within Europe, North America, and Asia. The bid amount that exceeds 80 billion yuan would incur 2.7 times the circulation.

Last Friday, the PBOC also pumped more cash into the financial system through open market operations as a measure to maintain yuan liquidity in the market. A total of 100 billion yuan was injected through the medium-term lending facility. The funds would mature one year after its establishment, garnering an interest rate of 2.95 percent.  

Since November 2018, the PBOC has established standard mechanisms by issuing central bank bills in Hong Kong. The strategy was said to promote yuan-investment products that have subsisting high credit ratings in Hong Kong's market. It would also offer more yuan liquidity management tools and enhance the generation of yuan bonds. The PBOC's issuances would also result in the Chinese currency's internationalization.