HONG KONG—Hong Kong and mainland Chinese regulators signed a deal allowing asset managers in each market to sell their funds to retail investors on the other side, the latest move by Beijing to open up its vast capital markets that had been mostly closed off until recently.

The agreement has been years in the making and will initially be capped at 300 billion yuan ($48 billion) flowing in and out of China each way, with only a handful of types of funds allowed to take part. The agreement will take effect July 1.

The move adds to a fast-growing list of financial overhauls from Beijing and comes less than a year after the start of a high-profile trading program linking the Shanghai and Hong Kong stock markets. While that has given equity investors easier access to China’s onshore markets, this latest program is expected to be especially beneficial to global fixed-income investors as it gives them an easier channel into the country’s large onshore bond market.

“Global investors are looking to increase allocation into China” and this gives them a way of doing so, said Rajeev De Mello, head of Asian fixed Income at Schroders in Singapore. Mr. De Mello said the program would make it much simpler for fixed-income investors to access the onshore bond market than the existing programs.

To access the domestic bond market, fixed-income investors currently have to navigate a labyrinthine quota system through various programs for institutional investors.