China's making it easier for foreign investors to buy its debt

Central banks, financial institutions and sovereign-wealth funds looking to invest in China’s massive and expanding bond market have just been given some good news – the PBOC welcomes your investment.

Xinhua, reporting the remarks from an unnamed bank official yesterday, are related to a move by the PBOC on July 14 that made it easier for offshore investors to participate in the nation’s interbank bond market, estimated at 35.3 trillion yuan (5.7 trillion US dollars) as at the end of May.

Foreign central banks, global financial institutions and sovereign-wealth funds will only need to register with the central bank to trade bonds in the spot and forward markets, conduct interest rate swaps, and trade forward rate agreements, according to the report. They will also be able to decide the size of their investment, rather than limited to specific quotas.

The move is aimed at speeding up the construction of a more transparent and open bond market to better play its role in resource allocation, said the official.

While there will be many who will be wary of investing in the large but relatively infant bond market, the move is yet the latest in a long line of reform measures announced by the PBOC, including greater interest rate liberalisation, designed to make Chinese capital markets more open, and importantly less opaque, to foreign capital flows.

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