HKEX: Five-year Chinese government bond futures provide an effective tool for foreign investors to manage duration and interest rate risks of bonds in mainland China.

HKEX announced that in August 2026, it will launch a five-year Chinese government bond futures contract, which is currently the only Chinese government bond futures product listed in the offshore market, allowing international investors to more effectively manage Renminbi interest rate risk without altering their current trading habits. The introduction of the five-year Chinese government bond futures further expands the variety of risk management tools available, providing effective tools for overseas investors to manage the duration and interest rate risks of bonds in mainland China. This product launch also enriches the ecosystem of offshore Renminbi products in the Hong Kong market and reinforces Hong Kongs role as a major channel for global capital participation in Chinas bond market. The launch of Chinese government bond futures reflects the increasingly important position of the Renminbi in the global market. According to SWIFT data, as of July 2026, the Renminbi is the fifth most commonly used payment currency worldwide, with its market share having doubled since the beginning of 2020. As the use cases for the Renminbi continue to expand, assets denominated in Renminbi are attracting more and more attention from international investors. As the worlds second-largest bond market, the Chinese bond market has gradually become an important component of international investors' asset allocation. When the Bond Connect was launched in 2017, the scale of domestic bonds held by overseas investors was around 800 billion Renminbi, which had grown to approximately 3.2 trillion Renminbi by June 2026: at the end of May 2026, the scale of Chinese government bonds held by international investors was about 2 trillion Renminbi. As the holding scale continues to grow, demand for offshore risk management tools is also increasing. A range of risk management tools has been introduced in succession: first, the Bond Connect provided a trading channel for bonds; then the Swap Connect launched in 2023 provides over-the-counter interest rate risk management tools. Overview of the Five-Year Chinese Government Bond Futures Traded and settled in Renminbi Can be bought and sold on public holidays in mainland China and Hong Kong (except for New Year's Day) Cash-settled, with no physical delivery of the underlying bonds required Prices determined based on a basket of Chinese government bonds, with a clear and transparent pricing methodology Contract Design HKEXs five-year government bond futures contract is cash-settled (traded and settled in Renminbi), with prices determined based on a basket of government bonds. The final settlement price of this futures contract will be based on the reference yield calculated from a basket of government bonds, determined through a standardized pricing formula for virtual bonds and provided by ChinaBond Financial Valuation Center Co., Ltd. on the last trading day. The basket of government bonds consists of the two most liquid Chinese government bonds, selected based on trading volume, and will be dynamically adjusted according to changes in liquidity. The contract references the most actively traded bonds to ensure that it reflects the most representative pricing basis in the market. The duration of each contract does not exceed six months. During this period, the contract will generally use a representative indicative basket of government bonds and will make adjustments based on market conditions to ensure that the contract reflects market trends. About a month before the contract expires, the basket of government bonds will be locked in so that investors can clearly understand which two bonds will determine the final settlement price while maintaining market representation. Through this design, the contract can closely track the yield of five-year Chinese government bonds, thereby effectively managing Renminbi interest rate risk and providing more convenient tools for offshore market participants in Chinese government bond investments. An Important Component of the Offshore Renminbi Ecosystem In recent years, the Hong Kong market has continued to promote various development initiatives to improve the operation of the offshore Renminbi interest rate market in multiple aspects. In the field of interest rate products, the Swap Connect plans to add FDR007 (the 7-day interbank repo reference rate) as one of the reference rates in the fourth quarter of 2026, aligning the offshore Renminbi interest rate swap curve with the most widely used repo benchmark rates by domestic institutions. In terms of infrastructure, HKEX is developing an electronic bond trading platform in collaboration with the China Foreign Exchange Trading System, aiming to facilitate connectivity between domestic trading and Hong Kongs international financial infrastructure. Additionally, subsidiaries of HKEX are gradually accepting Bond Connect holdings as non-cash collateral. These measures are all aimed at promoting the offshore Renminbi interest rate market towards a more unified and well-developed direction, allowing market participants to have a better experience in terms of market access, risk management, and collateral utilization through more efficient infrastructure. As these arrangements gradually take shape, it will become more efficient for investors to allocate Chinese mainland fixed-income products in Hong Kong; since the introduction of the five-year Chinese government bond futures in August, the Hong Kong market will further enhance its role as an offshore Renminbi interest rate risk management platform. As the largest offshore Renminbi center globally, Hong Kong will continue to enrich its products and risk management tools, thereby boosting market participants' confidence in holding Renminbi assets outside China. As the depth of the Renminbi market continues to increase, the internationalization process of the Renminbi will gain more momentum, of which HKEX's five-year Chinese government bond futures will be an important part.