Swap Connect: new enhancements, rising volumes
Jul 7, 2025

Continuous enhancements and rising trading volumes have defined Swap Connect’s progress since launch in 2023  and the momentum behind this story of progress continues to pick up pace in 2025.

The year kicked off with a landmark advance in January to expand the scope of eligible collateral for Northbound Swap Connect transactions to include China Government Bonds (CGBs) and Policy Financial Bonds (PFBs).

This enhanced collateral flexibility helped make RMB-denominated onshore bonds even more investible, allowing investors to improve capital efficiency and create space for a more diverse range of investment strategies.

And last week another new enhancement came to market, with the maximum tenor of interest rates swap contracts extending from 10 years to 30 years under Northbound Swap Connect.

This latest development is poised to reshape the offshore derivatives landscape in four key ways:
#1
Enhanced hedging: The 30-year tenor allows offshore investors to more effectively hedge long-duration exposures, aligning risk management with long-term asset profiles.
#2
Greater appeal to global institutional investors: Investors with long-term liabilities can participate more actively, as the extended tenor matches their investment horizons and risk management needs.
#3
Improved market depth: Longer-dated swaps contribute to a more complete interest rate curve, supporting price discovery and further developing the derivatives market.
#4
Product innovation: With longer swap tenors, financial institutions can design more customised products for end-clients to enhance capital efficiency and meet diverse investor demands.
Part of a broader ecosystem

This enhancement reinforces Swap Connect as a crucial channel into China’s fixed income market at a time when international investor participation is growing.

International investors’ total holdings of onshore fixed income products increased 10% in the past year to RMB 4.4 trillion as of April 2025, according to People's Bank of China statistics.

The enhancement also allows investors to ride powerful portfolio and product network dynamics.

The portfolio effect enables more efficient management of swap positions through contract compression, reducing portfolio size, capital costs, and operational complexity.

Meanwhile, the network effect is driving deeper liquidity and tighter spreads as platform accessibility improves and participation grows  fostering innovation and reinforcing market confidence.


The strength of these forces is reflected in Swap Connect’s turnover, which is notching steady gains.

Offshore investor participation has climbed from 22 at launch to over 80 at the end of Q1 2025.

Chart1 

Monthly trading volumes have soared from RMB 50 billion in May 2023 to RMB 380 billion in May 2025, with daily clearing volumes now averaging RMB 25 billion  far surpassing initial expectations.

As of May 2025, Swap Connect accounts for an estimated 8% of the onshore IRS market.


Where do we go from here?

There are more Swap Connect enhancements in the pipeline on top of the extension of the maximum tenor of interest rates swap contracts from 10 years to 30 years.

Later this year, the 1-year Loan Prime Rate (LPR 1Y) will be added to the range of floating reference rate options, providing a benchmark more closely aligned with China’s lending market, enhancing hedging precision for credit-linked exposures and helping offshore investors further develop financing in CNY assets or liabilities referencing the LPR 1Y benchmark.

We are confident further advances are in the pipeline.

The enhancements delivered over the past two years demonstrate strong demand from the international investment community to use this important channel.

This demand will be even greater as the process of RMB internationalisation accelerates.


The RMB now accounts for nearly 6% of global trade settlement, overtaking the euro’s share of 5.3%, according to SWIFT, and in 2024, cross-border RMB settlements with ASEAN countries surpassed RMB 5.8 trillion, more than double the volume recorded in 2021, according to the People’s Bank of China.

Against this exciting backdrop, we remain committed to working closely with all stakeholders to create an innovative, diverse and trusted cross-border trading infrastructure that supports Mainland China’s capital markets, facilitates RMB internationalisation and strengthens Hong Kong’s status as the leading offshore RMB hub, and we look forward to driving the Swap Connect story of progress forward in the coming years.