The People’s Bank of China will allow overseas central banks, international financial organizations and sovereign wealth funds to trade a wider variety of fixed income products as part of an ongoing opening up of the mainland’s interbank market.
The PBOC said these foreign investors can begin trading after finishing registration procedures with the PBOC in an apparent scrapping of an earlier approval process with the regulator. Foreign investors need simply mail their applications or ask an agent in the interbank market to file an application on their behalf.
Besides the bond and repo trading that is already permitted, the PBOC added interest rate swaps and bond forwards to the products that foreign investors can trade and will allow them to borrow bonds as well, a business that’s even restricted to many Chinese bond traders.
The central bank said foreign investors can decide the size of their investments, without mentioning if any quotas will be applied.
Foreign investors should hire the PBOC or other agent banks for trading and clearing business. Previously, foreign central banks were only permitted to use the PBOC itself as the agent bank.
The PBOC said in early June that clearing banks for offshore yuan business and participating banks in offshore yuan settlement business that have already won approval to trade in the domestic interbank market will be allowed to conduct repo trading.
Members of the interbank market, the biggest platform for trading bonds and currency in China, total 8,356. Of these, 107 are foreign banks operating in the interbank market, 13 are overseas insurers, 24 are qualified foreign institutional investors and 91 are institutional investors licensed to bring yuan onshore to invest.