China will move to proactively improve the connectivity of the domestic bond market, so as to facilitate the formation of the nominee holding arrangement in accordance with international practices and further open up its bond market, said Li Ruiyong, the deputy general manager of the Shanghai Clearing House (SHCH), Yicai.com reported.
Currently, overseas investors investing in the China interbank bond market through the Bond Connect will hold their bonds using the nominee holding arrangement. SHCH is the ultimate central securities depository.
Li thinks the three nominee holders of bonds in the country have different emphases in their products. The limited connectivity results in the low integration of market resources and the price differences of similar products.
If investors want to buy different types of bonds, they need to open separate accounts with different holders, which increases the complexity and their operating costs.
Thus, says Li, the separation of resources in the domestic market has greatly reduced the market’s overall competitive advantage, which is not conducive to international competition.