China opens bond market to foreign investors

The People's Bank of China in Beijing.
The People's Bank of China in Beijing.PHOTO: REUTERS

BEIJING • China will allow foreign investors direct access to its massive bond market from today, its central bank said.

A platform allowing one-way "northbound" investments from Hong Kong into the Chinese bond market will go into "experimental operation" today, the People's Bank of China (PBOC) and the Hong Kong Monetary Authority said in a joint statement yesterday, which came as Hong Kong marked the 20th anniversary of its handover to China by Britain.

Access to the market will be restricted to "qualified investors", including central banks and sovereign wealth funds, but also commercial banks, insurers, brokerage firms and investment funds, according to the PBOC.

China's debt market is the third-largest in the world, with a cumulative value of about US$10 trillion (S$13.8 trillion), according to Bloomberg news agency.

However, this booming market has been virtually out of reach for foreign investors, who currently hold only a small portion of the bonds issued in China - less than 1.5 per cent, according to Bloomberg estimates.

China has moved gradually towards opening its capital markets. In 2014, a trading link between the Hong Kong and Shanghai stock exchanges was introduced, and another was started in December last year between Hong Kong and Shenzhen, China's other exchange. The links give foreigners some access to China-listed shares, while also allowing Chinese firms to buy Hong Kong-traded stocks.

The bond move is the latest in a series of liberalisation pledges from China, which has regularly been hit by complaints from foreign companies and trading partners about access to its markets.

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on July 03, 2017, with the headline 'China opens bond market to foreign investors'. Print Edition | Subscribe