China to Pilot Direct Foreign Access to Interbank Bond Market

Source: Regulation Asia Editors, Regulation Asia 2020-08-24

Starting 1 September, foreign institutional investors and QFII/RQFII participants can trade in the China’s interbank bond market on a trial basis.

China’s NIFC (National Interbank Funding Center) has announced a new pilot programme through which foreign investors will be able to directly invest in the interbank bond market.

Starting 1 September, foreign institutional investors and QFII/RQFII participants who open bond accounts in the interbank bond market can participate on a trial basis.

Before trading, foreign investors will need to submit a letter of commitment and an application form (.xls) for opening transaction services through the settlement agent.

Foreign investors will be able to conduct spot bond transactions with domestic market makers through the trading system, and overseas third-party platforms will be also to connect to the system to provide “convenient services for overseas institutional investors”, the NIFC said.

The trial programme is applicable to treasury bonds, local government bonds, central bank bonds, financial bonds, corporate credit bonds, interbank certificates of deposit, asset-backed securities, standardised bills, and any other securities traded in the interbank bond market.

The minimum deposit for a single trading account is CNY 1 million. The smallest unit of change is also CNY 1 million, but foreign investors can conduct transaction splits and package transactions as needed, the NIFC said.

Settlement cycles of T+0 , T+1 , T+2 and T+3 are supported. This is in line with an August 2019 circular, which allowed foreign institutional investors trading in the interbank bond market to extend settlement for bond transactions to up to T+3 – to ensure the cross-border flow of securities and cash and to provide extra time for funding.

The NIFC notice is available here.

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China to Pilot Direct Foreign Access to Interbank Bond Market

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