Foreign central banks have enjoyed open capital account treatment with bond investments, and more reforms are in the pipeline, chief of State Administration of Foreign Exchange Pan Gongsheng writes
(From Caixin Online)
By staff reporters Wang Yuqian and Zhang Yuzhe
Recent moves taken by the Chinese government to relax restrictions on foreign institutions investing in the country’s bond market have given some of them open capital account treatment, Pan Gongsheng, deputy governor of China’s central bank who heads the State Administration of Foreign Exchange, wrote in a commentary published by Caixin.
As of 2015, he wrote, China’s bond trading rules for foreign central banks and similar institutions – which refer to sovereign wealth funds and global financial institutions such as the World Bank – have fully met the standards for capital account convertibility, which means cross-border financial capital flows can happen without or with minimum government restrictions.
The People’s Bank of China first allowed foreign investors into the interbank bond market, where more than 90 percent of all bonds are issued and traded, in 2010. Other foreign investors were given access later and the rules for them have been relaxed.
The most significant regulatory changes to the system were made over the past year. The latest was a central bank announcement in March that allowed almost all types of foreign financial institutions into the market. Before this, the rules for foreign central banks were relaxed in July allowing them to buy more types of bond products through a streamlined process, which freed them from quota restrictions and the need for prior approval.
As of December 31, there were 308 foreign institutions eligible to invest in the interbank bond market, an increase of 128 from the end of 2014, data from the central bank show.
They have issued a total of 18.5 billion yuan worth of yuan-denominated bonds in the market as of the end of March, Pan wrote. Read more