China Swap Connect trading volume heads toward 1 trillion yuan

Trading through China’s Swap Connect has accelerated in recent periods as global investors increase hedging activity to protect yuan-denominated bond positions. Since its May 2023 launch, the link between mainland and Hong Kong interest-rate swap markets has drawn growing participation and rising turnover, according to exchange and market authorities.

The move has been driven by product enhancements and regulatory support. HKEX data show monthly turnover rose from roughly RMB 50 billion in May 2023 to about RMB 380 billion by May 2025, with average daily clearing volumes around RMB 25 billion. The Securities and Futures Commission (SFC) reports that the aggregate notional amount of executed RMB interest-rate swaps has exceeded RMB 9.9 trillion since launch, with a daily average notional near RMB 15.4 billion; reflecting this growth, the daily trading quota was raised to RMB 45 billion in October.

Markets are feeling the impact: deeper swap liquidity and longer-dated tenors are improving price discovery across the onshore yield curve and giving investors more precise tools to manage duration and currency risk. The availability of swap hedges has also made RMB bond allocations more accessible to offshore investors, supporting cross-border portfolio diversification and risk management.

In a broader economic and policy context, Swap Connect is part of China’s calibrated opening of fixed-income markets and efforts to internationalize the renminbi. Coordination between the People’s Bank of China, the China Foreign Exchange Trade System, Shanghai Clearing House and Hong Kong authorities underpins the scheme’s infrastructure; recent extensions of eligible collateral and longer maximum swap tenors aim to align the market with global hedging practices.

Analysts say continued growth is likely as foreign holdings of onshore bonds rise and institutional demand for hedging increases. Further expansions of quota, product scope and ancillary services would support deeper participation, though market participants caution that liquidity conditions, regulatory adjustments and macro volatility will influence the pace and scale of future growth.