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April 10, 2017

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SCH, TMX to work to draw investors to China’s bonds

IN China’s latest push to attract foreign investment into the country’s US$9 trillion bond market, Shanghai Clearing House will work with Canada’s TMX Group to expedite cross-border investments.

SCH, supervised by China’s central bank, said in a statement on Saturday that by exploring ways to link securities registration and custody functions with TMX, “Canadian, and even North American investors will be given easier access to China’s bond market.”

In addition, the People’s Bank of China will further deregulate the bond market by improving legal, accounting, auditing, taxation and credit rating policies, and strengthen communications with overseas investors, the statement said.

China has stepped up efforts to open up its bond market — the world’s third-largest — to foreign investors in an effort to promote international use of the yuan. Attracting inbound investment could also help counter capital outflows and support the yuan’s value as China’s economy slows, some analysts have said.

Last month, Citigroup said it would include China’s onshore bonds in its emerging markets and regional indexes starting on February 1, 2018, following similar moves by Bloomberg.

Premier Li Keqiang said last month that a bond connect scheme between the Chinese mainland and Hong Kong will be launched this year.

Foreign ownership in China’s 63.7 trillion yuan (US$9.2 trillion) bond market is under 2 percent.

SCH said that by adopting practices that are more familiar to investors in mature bond markets, China can make its bond market more attractive to foreign investors, and accelerate market deregulation.


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