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<Europe> Euroclear Considers Accepting China Onshore Government Bonds Traded in Hong Kong as Collateral
The Financial Times reported that Euroclear plans to accept China onshore bonds traded in Hong Kong as collateral. If successful, this would mark the first time Euroclear allows it...
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<Europe> Euroclear Considers Accepting China Onshore Government Bonds Traded in Hong Kong as Collateral
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The Financial Times reported that Euroclear plans to accept China onshore bonds traded in Hong Kong as collateral. If successful, this would mark the first time Euroclear allows its clients to use China onshore government bonds as collateral. The institution currently permits the use of Chinese bonds issued in offshore RMB as well as certain onshore corporate bonds as collateral.

This move would support Beijings efforts to promote RMB internationalization. However, the institution cautioned that the initiative could take several years to materialize. China maintains strict capital controls, but Beijing has also been pushing for broader international use of the RMB to counterbalance the dominance of the USD. Relevant efforts include establishing bilateral currency swap agreements, settling trade in local currencies, and promoting the RMB as a reserve currency to central banks worldwide.

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Euroclear, one of Europes largest financial intermediaries headquartered in Brussels, held more than EUR43 trillion of assets under custody in 2025. The institution is working with mainland China and Hong Kong to participate in the Bond Connect program, which links mainland China with offshore investors. Chief Executive Officer Valerie Urbain said in an interview that the move aims to "explore how to contribute to RMB internationalization" and forms part of efforts to expand client services. She added that the company is considering how to cooperate with Chinese market regulators to further enhance the liquidity of RMB-denominated assets.

Euroclear plans to allow China onshore bonds held by investors via Bond Connect (currently totaling about USD120 billion) to eventually qualify as collateral for international transaction settlements. Urbain added that the initiative could theoretically open up Chinas EUR5 trillion government bond market for use as collateral in transactions settled through Euroclear. This would help boost international demand for the RMB and open Chinas bond market to Western investors.

The Chinese government, through Kuri Atyak Investment under the State Administration of Foreign Exchange (SAFE), holds a 7.25% stake in Euroclear.

Related NewsRetail Sales YoY for Apr in China is 0.2%, lower than the previous value of 1.7%. The forecast was 2%.
A spokesperson for CMU OmniClear, wholly owned by the Hong Kong Monetary Authority through the Exchange Fund, said it supports the broader acceptance of RMB bonds as eligible collateral in global financial markets. Using Bond Connect holdings as collateral would require approval from relevant authorities in mainland China and Hong Kong. (da/a)

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