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July 3, 2017

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Mainland bond market opening up

QUALIFIED overseas investors will be able to invest in the Chinese mainland interbank bond market via the mainland-Hong Kong bond connect program from today.

Relevant laws, regulations, business rules, operation schemes and regulatory arrangements have already been determined, while the technical system is also in place, said a joint statement by the People’s Bank of China and Hong Kong Monetary Authority yesterday.

The “northbound” bond connect, which allows qualified overseas investors buy bonds in the mainland interbank bond market either in yuan or other currencies, will operate on a trial basis.

The PBOC and HKMA have agreed on issues involving cross-border regulatory cooperation and signed a memorandum of understanding on cooperation in strengthening supervision.

Under the agreements, both sides will establish mechanisms for information exchange and assistance in accordance with local laws and their own statutory authority, to combat violations in cross-border trades and ensure effective operation of the program.

Institutions of both sides should organize market players to conduct the trades in an orderly manner, helping investors in the “northbound” trades have a comprehensive understanding of regulations and business schemes in the Chinese mainland bond market, according to the statement.

China approved a bond connect program between the mainland and Hong Kong in mid-May.

It allows investors from both sides to trade bonds on each other’s interbank markets.

Overseas investors should register the bonds they purchase under qualified overseas trusteeship bodies, which have accounts in mainland counterparts, under rules issued by the PBOC.

Those qualified investors include foreign central banks, sovereign wealth funds, international financial organizations, Qualified Foreign Institutional Investors, RMB Qualified Foreign Institutional Investors, and financial agencies including commercial banks, insurance companies, securities brokerage houses, and fund management companies.

They can invest in bonds that are tradable on the mainland interbank bond market,.

This includes treasury bonds, local-government bonds, policy bank bonds, commercial bank bonds, corporate bonds, and asset-backed securities, among others, the PBOC said.

The PBOC and other regulatory bodies have the right to access the data of overseas investors investing in the mainland interbank bond market, according to the rules.


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