Source: China Economic Net
On May 27, the People's Bank of China, the China Securities Regulatory Commission and the State Administration of Foreign Exchange issued a joint announcement to further facilitate foreign institutional investors to invest in China's bond market in compliance with laws and regulations, and to coordinate and simultaneously promote the opening of the inter-bank and exchange bond markets.
Industry experts believe that this is an important step in further promoting the institutional opening of China's bond market, which is conducive to improving the diversified investor team, improving the liquidity and stability of the bond market, expanding capital account inflows, and better promoting international income. Balanced expenditure is conducive to the overall utilization of two resources in the domestic and international markets to better serve the real economy.
Specifically, the first is to adhere to the legal person institution as the market subject and supervision object, clarify the rights and responsibilities of all parties, and support foreign institutional investors to invest in the exchange bond market directly or through the interconnection and interoperability, and independently choose the trading venue. Second, based on years of good practices in my country's commercial bank counters, cross-market transfer custody, and "Bond Connect" business, adhere to penetrating data and information collection, and explore the establishment and improvement of inclusive institutional arrangements compatible with multi-level custody. Foreign institutional investors investing in the inter-bank bond market can independently choose a bond registration and settlement institution or a domestic custodian bank to provide bond custody services according to their actual needs.
The relevant person in charge of the People's Bank of China introduced that the scope of foreign institutional investors admitted to the market has not changed, and the procedures have been further simplified, and the scope of investment can be extended to the exchange bond market. 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 the institutions that have already filed, there is no need to record each product one by one. For the products that have been filed, the existing bond account can be retained in the inter-bank bond market, or it can be merged into the legal person level, and the relevant financial infrastructure should provide non-transaction transfer services.
In recent years, various policy arrangements for foreign institutions to invest in China's bond market through direct market access have been continuously improved, the scope of entities and investment varieties have been continuously expanded, and the management methods have become more market-oriented. The “Northbound Connect” of Bond Connect was launched in July 2017, and overseas institutions can “one-point access” to the mainland bond market through Hong Kong. The "Southbound Connect" of Bond Connect will be launched in September 2021, providing a convenient channel for mainland institutional investors to invest in Hong Kong and the global bond market. The long-term arrangement of the tax-free policy for foreign institutions to invest in the Chinese bond market has been gradually optimized, and the tax-free period has been extended to the end of 2025. The legal system of the bond market has been continuously improved, and the core business rules and key standards such as information disclosure, credit rating, and default handling mechanisms for corporate credit bonds have been gradually unified.
According to the data, 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 have entered the Chinese bond market, with a total debt holding size of 3.9 trillion yuan. , an increase of 225% from the end of 2017. At the same time, Bloomberg, JPMorgan Chase and FTSE Russell, three international bond index providers, have all included Chinese bonds into their major bond indices.
The People's Bank of China said that in the next stage, the People's Bank of China, the China Securities Regulatory Commission and the State Administration of Foreign Exchange will continue to optimize various institutional arrangements, improve the risk prevention mechanism, and provide a more friendly and convenient investment environment for domestic and foreign investors.
