The Financial Silk Road

August

The recent excitement surrounding the stablecoin market has been tempered by caution from the Hong Kong Monetary Authority, which now plans to issue new stablecoin licenses only in 2026. Regulators worry that a flood of new stablecoin issuances, riding on the success of Tether and USD Coin, could trigger an unjustified surge in valuations and possibly fuel a speculative bubble.

JD.com, the giant Chinese online retailer, through its Berlin-based subsidiary, launched a tender offer of €2.2 billion to buy the German electronics retailer Ceconomy, which controls more than one thousand shops (MediaMarkt and Saturn) across Central Europe. Regulatory approval by German regulators is awaited in 2026.

In the first half of 2025, Brazil miners sold a record $6.7 millions of rare earths to China. The figure tripled compared to 2024.

Bank of China led a consortium of banks providing a renminbi syndicated loan of 14.2 billion (almost $2 billion) to the Australian mining giant Fortescue. It is the first loan of its kind and an advancement in renminbi internationalization.

In the first half of 2025, Hong Kong’s assets under management grew 13% to HK$35 trillion ($4.46 trillion). An important driver was investments into Chinese Hong-Kong-listed shares and Chinese American depository receipts. While these markets registered a net outflow in the first quarter of 2025, they attracted $44 billion in the second quarter, representing almost half of Asia inflows.

State Street leaves trustee role in Hong Kong’s Tracker Fund while access to Hong Kong markets form Mainland China is increasing 26% year-to-date in early August. Geopolitics seems to be at the core of the decision, as investments in the fund entail links to Chinese blacklisted companies. The role is likely to be taken over by HSBC.

Chinese state-owned big banks and joint-stock banks commit to help boost consumption by providing consumer loans at 1.5-2% interest rate. After testing pilot programs in Chongqing city district and Sichuan province between others, Chinese banks will extend subsidised loans to purchase cars, mobiles and other electronics, furniture and home renovations nationwide.

As of August 2025, China’s non-performing loans are increasing year-to-date as the government pushes banks to help small and medium enterprises despite risks.

September

On September first, in Tianjin, during the 25th summit of the Shanghai Cooperation Organisation (SCO), China’s president Xi called for the creation of a SCO development bank to mobilise grants and loans to member states for increasing cooperation and economic security. China’s investments in SCO countries exceeds $80 billion, while bilateral trade between China and member states is over $500 billion. Through the Belt and Road Initiative, China built more than 14,000 km of railways across SCO territory to connect it to Europe.

With a foreign direct investment (FDI) stock of over $3 trillion, China is the world’s third investor after the U.S. and Japan, representing 7.2% of total FDI. New trends show that China is driving its outward investments into Belt and Road countries to strengthen its supply chains.

Luxembourg-based Alipay Europe has been fined €214,000 by the local financial regulator, the CSSF, for breaching anti–money laundering laws. Luxembourg’s strict regulatory standards put non-EU financial and payment firms, especially Chinese ones, under pressure to meet compliance requirements. In China, remote account opening and know-your-customer procedures differ significantly from those in the EU.

Citibank China has terminated its membership to UnionPay as it closes its retail banking business in Mainland China. From now on, Citibank China will focus on corporate banking. This is part of Citibank Group restructuring of its markets started in 2021.

Following its ambitions to become a digital financial hub, Hong Kong has unveiled new crypto asset regulations that will take effect in early 2026. Under these rules, stablecoins licensed under the Stablecoin Ordinance, which took effect on August first, 2025, will be classified as low-risk assets (asset group 1), in contrast to non-backed crypto assets such as Bitcoin (asset group 2). Newly issued digital sovereign bonds will be categorised as group1 (low risk), thereby easing bank capital requirements.

Agricultural Bank of China has surged ahead of its state-owned rivals, becoming the country’s no.2 bank by assets and leading in profit growth thanks to its strong focus on inclusive finance. Its success in rural and agricultural lending has boosted its stock (+40% year-to-date in September) and pressured competitors, especially no.1 ICBC, to improve efficiency and financial management.

China continues with its bond market reform. In August, the Ministry of Finance and the tax authority introduced a new tax policy ending long-standing tax exceptions on interest income from newly issued sovereign and local government bonds for institutional investors. The aim is to correct bond market distortions and elicit trading activity, namely, to shift investments towards corporate bonds by reducing excessive capital in government debt.

China will expand the southbound (from Mainland China to Hong Kong) investment mechanism of its Bond Connect program, allowing securities, insurance, mutual fund, and wealth management firms to buy offshore yuan bonds without using their QDII quotas. The trial phase is expected to start by the end of 2025, aiming to boost liquidity and advance renminbi internationalization.

In mid-September, the State Administration of Foreign Exchange (SAFE) lifted a ban that prevented foreign companies from buying non-self-use residential properties and easing cross-border investment rules. The new regulation aims at attracting foreign investments to help revive the housing market and simplifying reinvestment and registration procedures.

 China launched a unified QR code system for cross-border payments in a pilot that began in late July 2025, co-developed by China UnionPay and the Payment and Clearing Association of China to simplify integration between domestic and foreign e-wallets, which now include those from Singapore, Malaysia, Thailand, Hong Kong and Macao. The system has already processed 2 million transactions worth 427 million yuan, aiming to make payments easier for overseas visitors and boost financial connectivity.

On September 18, the Hong Kong Monetary Authority announced the creation of a new renminbi financing facility backed by the People’s Bank of China to provide longer-term funding for companies and strengthen its role as the leading offshore renminbi hub. The initiative aims to ease potential liquidity shortages, reduce funding costs, and advance renminbi internationalization.

China has granted foreign investors full access to its $21 trillion bond repurchases (repo) markets, aligning its system with global standards to boost liquidity and transparency. The move aims to attract long-term foreign capital, strengthen the renminbi’s appeal, and further integrate China’s with global financial markets.

End of September 2025, China has launched an international operations centre for its digital renminbi in Shanghai to strengthen the e-CNY’s role in global payments and digital finance. The centre will develop platforms for payments, blockchain services, and digital assets, advancing renminbi internationalization and supporting Shanghai’s role as a global financial hub.

Key sources: Caixin Global, China Banking News, Financial Times, The Wall Street Journal …