China's central bank on Wednesday issued a draft regulation on the bond connect program between the Chinese mainland and Hong Kong. It specifies that all bonds traded in interbank markets are also available to Hong Kong investors.

Foreign investors can use yuan or foreign currencies to trade bonds through the program from their Hong Kong accounts. The yields from the bond investment should be changed back to foreign currencies. Currency exchanges under the bond connect will be regulated under the yuan's exchange program.

According to the regulation, the central bank and financial watchdogs have access to data of foreign investors and they are allowed to intervene if they find illegal activities. The draft regulation marks a big step towards the launch of the bond program.