New rules to facilitate overseas investment in Chinese bond market

China’s central bank on Friday unveiled cash management rules for overseas institutional investors looking to the country’s bond market, in a fresh move to beef up the attraction of a continuously opening financial market.

The new rules are set to streamline overseas institutions’ investment in China’s bond market and lower their trading costs, analysts said, expecting more deregulating moves to channel overseas investors into a wider range of bond portfolios.

Describing the rule announcement as an effort to ramp up the two-way opening of the financial market, the People’s Bank of China (PBC), the country’s central bank, said in a statement on its website on Friday that the new regulation aims to boost the appeal of China’s bond market for overseas institutional investors.

The new regulation, which comes into force on January 1, 2023, crystallizes a unified set of management rules for cash accounts, receipts and payments, remittances and statistics and monitoring, among other areas involved in overseas institutional investors’ commitments to the country’s bond market, read the PBC statement.

The new regulation will facilitate overseas institutions’ investment in the bond market as it partially eases curbs on overseas funds investing in Chinese bonds and lowers the trading costs of their bond investment, Wu Jinduo, head of fixed income at the research institute of Great Wall Securities, told the Global Times on Friday.

Among the highlights of the new rules are an improvement in spot foreign exchange sale and purchase management that allows overseas institutional investors to handle forex settlements through third-party financial institutions other than settlement agents.

Additionally, overseas instructional investors will gain access to expanded forex hedging channels, according to the new rules that also scrap the limits on the number of counterparties in over-thecounter trades.