China might be gearing up to shake up global bond flows — again. Regulators are weighing a plan to double the quota on the Southbound Bond Connect program to 1 trillion yuan ($139 billion), according to people familiar with the discussions. That would mark the first major expansion since the link was launched in 2021. The key change? A proposed 500 billion yuan slice reserved specifically for non-bank financial institutions — like mutual funds and insurers — who've been sidelined until now. If approved, this could give onshore investors wider access to offshore dollar bonds listed in Hong Kong, potentially fueling new demand.
While the People's Bank of China hasn't made anything official, this push would fit into a larger trend. Beijing has quietly rolled out a series of financial liberalization efforts this year — including tweaks to cross-border payments and a broader mandate for overseas investing. The underlying message: China is leaning into two-way capital flows. It's not a direct play to internationalize the yuan, but opening outbound investment may help chip away at long-standing concerns that capital controls make China too closed to matter globally.
For investors, this could also light a fire under the offshore yuan bond market — better known as the dim sum market — where yields often top those of onshore equivalents. Governor Pan Gongsheng has already floated the idea of moving away from a dollar-centric world, pointing to a future where multiple currencies share the stage. While foreign investors already enjoy quota-free access to Chinese bonds via the Northbound channel, this southbound upgrade — if it goes through — could be China's next step in remapping global capital flows.
