China’s move to open up its fixed income market to foreign investors will eventually unleash “massive” demand for the mainland’s bonds, Charles Li, CEO of Hong Kong’s stock exchange, told CNBC on Friday.

In May, regulators in Hong Kong and on the mainland approved a “bond connect” program to allow investors operating in Hong Kong to trade Chinese bonds, called a “northbound” flow, with a “southbound” flow of Chinese investment into Hong Kong to be considered later.

Authorities also won’t cap the amount that foreigners can invest in China.

“I think this is a huge breakthrough,” Li told CNBC’s “Squawk Box” on the anniversary of Hong Kong’s handover to China.

The HKEx CEO said that while large investors are already able to access the mainland fixed income market though existing programs, the bond connect would be fundamentally different.

“People are now finally able to do it and able to do it in a way that is familiar, that is similar to the way we trade U.S. dollar Treasurys or other international treasury fixed income instruments,” he said. “That is something so new. That the demand, underlying demand, the potent demand are massive.”

He noted that with China’s yuan being included in the IMF’s Special Drawing Rights (SDR) basket in November 2015, some investors must include at least some renminbi assets on their balance sheets. Inclusion in the SDR means the renminbi is now officially recognized as a reserve currency.

“That will require massive reallocation of capital but over quite a long period of time,” Li said, saying foreign investment into Chinese bonds was “at the beginning of the beginning.”

The “bond connect” program is similar to the Shanghai and Shenzhen’s stock connect programs which allow foreign investors access to mainland-listed stocks, while Chinese investors can buy select Hong Kong stocks.

The HKEx CEO said the “bond connect” would likely launch “pretty soon.”

UBS Asset Management projected in a report last week that China’s bond market would double in size from the current $9 trillion over the next five years, overtaking Japan’s to become the world’s second largest behind the United States.

It predicted that China’s local government bond market will grow to more than $3 trillion in the next three years from the current $1 trillion, nearly on par with U.S. municipal debt size of $3.8 trillion.

The country’s capital controls have prevented its bonds from being included in major global bond indexes, Goldman said in a February note.

Tradeweb Markets announced earlier this week that it would be the first offshore trading platform to connect with the China Foreign Exchange Trade System (CFETS) to become the main trading interface for the “bond connect”.

Lee Olesky, CEO of Tradeweb Markets, told CNBC’s “Squawk Box” on Friday that he expected the introduction of electronic trading of China’s bonds to bring greater pricing transparency.

“The value of electronic trading is being able to instantly see on your screens the pricing in the market, essentially click a button and transact,” Olesky said. “Previously, before the introduction of electronic trading, both in general, and in specific here in China, this was a market that was completely over the phone. It was a voice transaction model that did not have price transparency.”

Like HKEx’s Li, Olesky also expected that the bond connect would prove popular.

“I can’t remember a time we’ve had more interest from clients with a new offering as we do in this instance with bond connect and access into China,” he said. “We have pretty high expectations.”

—CNBC’s Yen Nee Lee and Sophia Yan contributed to this report.

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