BNY Mellon combines with HKMA to help US issuers tap dim sum bonds

The aim is to help firms comply with US withholding tax requirements on foreign persons and entities, as the total issuance for dim sum bonds in 2023 tallied $76 billion in Hong Kong.

February 27, 2024

BNY Mellon has launched its US Withholding Tax Administration service to help US issuers tap into Hong Kong’s offshore renminbi (Rmb) market through dim sum bond issuances, according to a February 26 announcement.

Developed with the Central Moneymarkets Unit (CMU) of the Hong Kong Monetary Authority (HKMA), the service is designed to allow US issuers to gain access to a wider pool of liquidity and benefit from lower funding costs in Hong Kong and mainland China while complying with US tax withholding requirements on US source income paid to foreign persons and entities.

The move could potentially drive increased issuance from US issuers, rather than mainland Chinese issuers. More issuance from US issuers is expected to see an expanded range of bonds available to institutional investors in mainland China. 

Hong Kong is the largest offshore Rmb center in the world, with dim sum bond issuance reaching a record Rmb550 billion ($76.4 billion) in 2023, representing a 65% year-on-year increase, according to the HKMA. 

Fangfang Chen, BNY Mellon’s head of Asia Pacific, said in the statement: “As investor demand for Rmb-denominated opportunities continues to expand globally, this service resolved a key hurdle for US issuers seeking to benefit from the new Bond Connect scheme between Hong Kong and mainland China. Our work with the CMU also underscores our shared commitment to enhance global capital markets connectivity.”

Stanley Chan, president, CMU at the HKMA, added: “We are pleased to collaborate with BNY Mellon to enable issuers to leverage the Bond Connect scheme and Hong Kong’s financial infrastructure to access onshore and offshore Rmb capital."

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