In China: Govt opens $10 trillion bond market in liberalisation step

In China: Govt opens $10 trillion bond market in liberalisation step

The new link-up between Shanghai and Hong Kong will allow foreign investors to access China's $10 trillion bond market

The new conduit comes via Hong Kong, where "qualified investors" will be able to buy debt in China.

China on Monday opened up its $10 trillion bond market to foreign investors, in the latest liberalisation move by Beijing as it seeks to draw in more fund flows as it battles slowing economic growth.

The new conduit comes via Hong Kong, where "qualified investors" will be able to buy debt in China — the world's third-largest bond market after the United States and Japan.

Qualified investors include central banks, sovereign wealth funds, and other major financial institutions, according to the People's Bank of China (PBoC) and the Hong Kong Monetary Authority, who jointly announced the platform on Sunday.

Their statement said the "bond connect" arrangement between the Hong Kong and mainland Chinese markets went into "experimental operation" from Monday.

The announcement came on a weekend in which Hong Kong and China marked the 20th anniversary of Britain's handover of the southern Chinese financial centre back to Beijing in 1997.

"The bond connect is an important move for the central government to support Hong Kong’s development and promote cooperation between the mainland and Hong Kong," the PBoC said Monday.

It will "promote Hong Kong’s long-term prosperity and stability and provide a more convenient investment channel for overseas investors. It will also steadily push forward the opening up of China’s financial market".

The growing Chinese bond market has been virtually out of reach for foreign investors, who currently hold less than 1.5 percent of bonds issued in China, according to estimates by Bloomberg.

Opening up

The new platform mirrors previously established link-ups between the share markets of Hong Kong and mainland China that now allow foreign and Chinese investors to buy shares in the each other's markets.

Those links give foreigners some access to China-listed shares, while also allowing Chinese firms to buy Hong Kong-traded stocks.

The new bond connect scheme, however, currently only allows foreign investors to buy Chinese debt.

HSBC said it completed its first deal under the new arrangement as underwriter for a bond issue by Agricultural Development Bank of China.

"The enhanced ease of investment under Bond Connect will attract more overseas funds, creating a more diversified investor base and further enhancing the market’s size and depth," Helen Wong, HSBC Greater China Chief Executive, said in a statement.

"This will help pave the way for China bonds to be included in major global bond indices in the future."

China has for years faced foreign complaints about restricted access to its markets, but has recently made a series of liberalisation pledges partly to expand its global market influence.

Last month, leading index compiler MSCI said it would include Chinese shares in its global emerging-market indices, citing loosening restrictions on foreign ownership of Chinese stocks.

After years of runaway growth, China is grappling with slowing economic expansion, and has moved to stanch massive capital flight by Chinese funds seeking better returns overseas while trying to lure more foreign investment.

Utilisation of the new bond connect platform, however, could hinge on fears of mounting Chinese debt levels which have prompted warnings of a looming crisis and possible defaults. China has moved aggressively in recent months to rein in runaway credit.

Source: Business

Click to add a comment

Leave a Reply

Your email address will not be published. Required fields are marked *


More in Business

CBN: Apex bank boosts foreign exchange supply with $195M

adminJuly 17, 2017

National Bureau of Statistics: Nigeria’s inflation drops to 16.10 % in June – agency

adminJuly 17, 2017

Introducing TEDxYaba 2017: Maryam Uwais, Omobola Johnson, Seni Sulyman, Lala Akindoju, Judith Okonkwo and more to speak at the Event

adminJuly 17, 2017

CBN: Apex bank injects $142.5M into foreign exchange market

adminJuly 10, 2017

Max-Migold Facilities Master Craft Program: Earn from N150,000 monthly as a Facility Mangaer

adminJuly 10, 2017

Economic Recession: Prof Nwaekeaku says CBN’s intervention in forex market is temporal

adminJune 26, 2017

Audu Ogbeh: Nigeria begins yam export to US and UK

adminJune 26, 2017

Cocoa House: Osun move to revival South-West cocoa phenomenon, process 20,000 tonnes daily

adminJune 24, 2017

First Bank of Nigeria Limited: Bank launches new responsive, feature rich website built for the digital age

adminJune 16, 2017

Copyright © 2016 NigeriaOnline.