BNY Mellon has launched a US withholding tax administration service, a market-first solution that enables US issuers to tap into Hong Kong’s offshore renminbi (RMB) market through dim sum bond issuances.

Developed in collaboration with the Central Moneymarkets Unit (CMU) of the Hong Kong Monetary Authority, the service allows 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.

It also expands the range of offshore RMB bonds available to institutional investors from mainland China, offering them more investment opportunities.

“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,” says Fangfang Chen, head of Asia-Pacific at BNY Mellon. "Our work with the CMU also underscores our shared commitment to enhance global capital markets connectivity.”

Hong Kong is the world’s largest offshore RMB centre in the world, with dim sum bond issuance reaching a record 343 billion yuan (US$47.65 billion) in the first eight months of 2023, representing a 62% year-on-year increase.