Research On The Linkage Between Hong Kong's Offshore RMB Government Bond Market And Onshore Government Bond Market

Since its establishment in 2007,the offshore RMB bond market in Hong Kong has been growing in a short period of less than 10 years.However,the rapid development of the offshore RMB bond market has further consolidated Hong Kong's offshore RMB center status.On the other hand,The process plays a very important role in the process of internationalization of RMB.Before the establishment of the offshore RMB bond market,Hong Kong had launched a relatively basic RMB business.Because of the frequent trade between Hong Kong and the Mainland,which leads to a large amount of RMB stock in Hong Kong,there is no RMB-denominated investment products.Therefore,the RMB stock can only be deposited in bank accounts in Hong Kong.There is a strong investment demand.At the same time,the RMB internationalization strategy is gradually put on the agenda,China needs to choose Hong Kong as an experimental base,promote the RMB internationalization process step by step.Hong Kong offshore RMB bond market came into being.Hong Kong offshore RMB bond market development history can be 'divided into three stages,in the initial stage,the government has restrictions on the issuer,the bond issue on the market was less.In 2009,the implementation of cross-border trade RMB settlement pilot,increasing the offshore RMB stock,while the development of offshore bond market played a significant role in boosting.This stage is the rapid development stage.The stock market crash in 2015,8.11 exchange reform,the sudden emergence of panda bonds,leading to the development of offshore bond market great uncertainty,this is a new stage of market development.Hong Kong's offshore RMB bond market has been characterized by a number of features,such as smaller market size,diversification of investment and issuance,low interest rates and reliance on RMB appreciation expectations.At the same time,there are many problems in the development process of the market,such as poor mobility,large fluctuations,bond rating mechanism is not perfect,bond yield curve has not yet formed,return mechanism to be improved and so on.With regard to the empirical research on the relationship between offshore and onshore bond market,the predecessors simply use the offshore and onshore bond index as the proxy of bond yield in the data selection.The problem is not considered which the duration of bond index does not match the problem,so this article for this problem has been improved,which is one of the innovations of this paper.As the local bond yields can be roughly considered as the local base rate,the offshore data selected bond index in the cross-bank bond index as a proxy for the index,while on-shore data to select the annual yield as a candidate.First of all,making Granger causality test,the relationship between the offshore and onshore market guide analysis,found in the offshore market there is a one-way guide to the offshore market relationship;followed by the establishment of VAR model,impulse effect analysis,combined with Granger Causality test results.Now,there are close relations between the yield of the Hong Kong offshore bond index and the 5-year and 7-year bond yields in China.Therefore,these three variables are chosen as the basis for the establishment of the GARCH model.In this paper,the GARCH(1,1)model is used to study the linkage relationship between the offshore RMB bond market and the onshore market.Different from the previous papers,the empirical results show that there is a strong correlation between cross-strait bond market.Since the establishment of offshore bond market is still short,the market size is small,it is difficult to impact on the onshore market,so the onshore market still plays a leading role,and this leading role is more obvious,there is linkage between the two sides of the market.In view of the problems existing in the construction and development of the offshore bond market and the healthy development of the cross-strait bond market,this paper puts forward some suggestions,such as further liberalizing the capital account,enriching RMB investment products and increasing the capacity of RMB funds pool.To improve the rating system and pricing mechanism,develop the secondary market of RMB bond in Hong Kong,strengthen the construction of onshore market,and strengthen the integration of cross-strait market exchange and so on.