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Expanding the investment scope, simplifying the procedures, and further opening up the bond market s

Date: 2022-06-01
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The institutional opening of China's bond market has taken another important step. The People's Bank of China, China Securities Regulatory Commission and Foreign Exchange Bureau recently issued Joint Announcement [2022] No.4 (on matters related to further facilitating foreign institutional investors' investment in China's bond market) (hereinafter referred to as the Announcement), to promote the opening of the inter-bank and exchange bond markets to the outside world as a whole. According to the Announcement, the scope of foreign institutional investors allowed to enter the market has not changed, while the procedures have been further simplified, and the investable scope has also been extended to the exchange bond market.

According to industry insiders, the announcement embodies the principle of 'one set of institutional rules and one bond market', which can further facilitate foreign institutional investors to invest in China's bond market and unify the cross-border management of funds. At the same time, it will enhance the liquidity and stability of the bond market, help expand the inflow of capital projects, better promote the balance of international payments, and enhance the financial system's ability to cope with complex international situations.

In fact, in recent years, China's bond market has made positive progress in opening up to the outside world, and various policy arrangements for overseas institutions to invest in China's bond market through direct market access channels have been continuously improved, the scope of subjects and investment varieties have been continuously expanded, and the management methods have become more market-oriented. On this basis, and under the current institutional framework, the Announcement further strengthened the systematicness, integrity and synergy of China's bond market opening to the outside world.

Specifically, first, we should adhere to the legal person institution as the main body of the market and the object of supervision, clarify the rights and responsibilities of all parties, and support foreign institutional investors to invest in the bond market of the exchange directly or through interconnection, and choose the trading place independently. Second, based on many years of good practices in China's commercial banks, such as over-the-counter custody, cross-market custody transfer and 'bond-through' business, we insist on penetrating data and information collection, and explore the establishment and improvement of inclusive institutional arrangements compatible with multi-level custody. Foreign institutional investors who invest in the inter-bank bond market can independently choose bond registration and settlement institutions or domestic custodian banks to provide bond custody services according to actual needs.

'The scope of foreign institutional investors allowed to enter the market has not changed, the procedures have been further simplified, and the investable scope has been extended to the exchange bond market.' The relevant person in charge of the People's Bank of China answered a reporter's question and said. In terms of market entry procedures, foreign institutional investors enter the market as legal persons. For the newly added products of the institutions to be filed and those that have already been filed, there is no need to file the products one by one. For products that have been filed, the existing bond accounts can be kept in the inter-bank bond market or merged into the legal person level, and the related financial infrastructure should provide non-transaction transfer services. Foreign institutional investors entering the market can directly invest in the exchange bond market after applying for opening a securities account with relevant filing documents and other materials. The qualification list of qualified foreign investors in the exchange market can be inquired through the website of CSRC, or they can invest in the exchange bond market through interconnection. There is no need to go through the filing or approval formalities separately in both ways.

According to data from the People's Bank of China, as of the end of April 2022, the balance of China's bond market was 138.2 trillion yuan, ranking second in the world since 2016. A total of 1,035 foreign institutional investors entered China's bond market, with a total debt holding of 3.9 trillion yuan, an increase of 225% compared with the end of 2017. At the same time, Bloomberg, JPMorgan Chase and FTSE Russell, three international bond index suppliers, have included Chinese bonds in their major bond indexes, which fully reflects the confidence of international investors in the long-term healthy development of China's economy and the continuous expansion and opening of its finance. According to industry insiders, with the further opening of the bond market, more overseas incremental funds will enter the Chinese market.

In the next stage, the three departments will continue to follow the unified arrangements of the CPC Central Committee and the State Council, adhere to the overall national security concept, continuously optimize various institutional arrangements, improve the risk prevention mechanism, provide a more friendly and convenient investment environment for domestic and foreign investors, support the construction of a high-level financial opening pattern that meets the requirements of high-quality development, and improve the international competitiveness of financial markets.


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