China Imposes Restrictions on Connect Bond Outflows, Sources Say
China's central bank, the People's Bank of China (PBOC), has instructed some domestic banks to limit their outward investments through the Bond Connect scheme, in an effort to contain yuan flows into Hong Kong and restrict the supply of yuan in offshore markets. This move is part of a series of measures aimed at supporting the Chinese yuan, which has been facing downward pressure due to a weak economy and capital outflows. The PBOC's guidance is expected to reduce mainland capital outflows through the bond market and potentially drive up offshore yuan yields to support the renminbi.