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China to allow more foreign capital in bond market
By Lydia Chen |
November 23, 2011, Wednesday
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Online Edition
Online Edition
CHINA will allow more foreign institutional investors to plough money into the country's bond market while more Chinese firms will be encouraged to go overseas to issue bonds, a senior central bank official said today.
"We'll actively and gradually open up China's bond markets to more foreign capital with the expanding use of the renminbi in overseas countries," Xie Duo, director of the financial market department of the People's Bank of China, told a forum in Beijing.
Meanwhile, more domestic companies would be allowed to seek financing via bond issuing in foreign countries, he added.
The two-way bond investments will help China step up the internationalization of its currency and reduce the second largest economy's reliance on the US dollar.
China opened the door to allow foreign institutional investors into the country's interbank bond markets more than two years ago and so far about 30 foreign institutional investors have put a total of more than 10 billion yuan (US$1.57 billion) in the country's bond market.
The country has also been actively trying to expand offshore bond markets, especially in Hong Kong.
The total amount of capital raised by Chinese firms from the sales of the so-called dim sum bonds in Hong Kong is expected to jump to 50 billion yuan this year, according to Zhou Xiaochuan, governor of the PBOC, in August.
Dim sum bonds refer to yuan-denominated bonds issued in Hong Kong. These bonds are attractive to foreign investors who desire exposure to yuan-denominated assets, but are restricted by China's capital controls from investing in domestic Chinese debt.
By the end of September, total yuan savings in Hong Kong reached 622 billion yuan, the most held by a region outside the Chinese mainland.
Meanwhile, Xie also said financing through bond issuing may help Chinese governments "set up a more transparent and balanced scheme."
Local governments relied heavily on bank loans for financing, which resulted in little transparency in how they use the money they have at hand, Xie said.
By this Monday, the governments of Shanghai, Guangdong and Zhejiang had completed trial bond sales while Shenzhen is expected to roll out trial sales next Monday.
But Xie added that the country needed to set up a scheme to push local governments to reveal more information to the public if they wanted to raise funds.
"It's hard to solve the problem in a short time, but at least, we've already made the first step," he said.
"We'll actively and gradually open up China's bond markets to more foreign capital with the expanding use of the renminbi in overseas countries," Xie Duo, director of the financial market department of the People's Bank of China, told a forum in Beijing.
Meanwhile, more domestic companies would be allowed to seek financing via bond issuing in foreign countries, he added.
The two-way bond investments will help China step up the internationalization of its currency and reduce the second largest economy's reliance on the US dollar.
China opened the door to allow foreign institutional investors into the country's interbank bond markets more than two years ago and so far about 30 foreign institutional investors have put a total of more than 10 billion yuan (US$1.57 billion) in the country's bond market.
The country has also been actively trying to expand offshore bond markets, especially in Hong Kong.
The total amount of capital raised by Chinese firms from the sales of the so-called dim sum bonds in Hong Kong is expected to jump to 50 billion yuan this year, according to Zhou Xiaochuan, governor of the PBOC, in August.
Dim sum bonds refer to yuan-denominated bonds issued in Hong Kong. These bonds are attractive to foreign investors who desire exposure to yuan-denominated assets, but are restricted by China's capital controls from investing in domestic Chinese debt.
By the end of September, total yuan savings in Hong Kong reached 622 billion yuan, the most held by a region outside the Chinese mainland.
Meanwhile, Xie also said financing through bond issuing may help Chinese governments "set up a more transparent and balanced scheme."
Local governments relied heavily on bank loans for financing, which resulted in little transparency in how they use the money they have at hand, Xie said.
By this Monday, the governments of Shanghai, Guangdong and Zhejiang had completed trial bond sales while Shenzhen is expected to roll out trial sales next Monday.
But Xie added that the country needed to set up a scheme to push local governments to reveal more information to the public if they wanted to raise funds.
"It's hard to solve the problem in a short time, but at least, we've already made the first step," he said.
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