Capital Market Developments in China
Capital Market Developments in China by Ricco Zhang, Mushtaq Kapasi and Yanqing Jia
Capital market regulatory developments in China Two market guides by ICMA and NAFMII On 24 September 2021, ICMA and NAFMII launched two publications intended to encourage understanding and participation by international institutions in China’s interbank bond market. Investing in China’s Interbank Bond Market: A Handbook and Panda Bonds: Raising Finance in China’s Bond Market (Case Studies) provide guidance for international investors and issuers on investing and on raising finance in China’s interbank bond market.
Southbound Bond Connect On 24 September, southbound trading under the Bond Connect initiative was officially launched. Under Southbound Bond Connect, mainland investors that meet PBOC’s requirements may invest in bonds issued overseas and traded in the Hong Kong bond market. Counterparties are tentatively limited to market makers designated by the HKMA. The annual aggregate quota for Southbound Bond Connect is currently set at RMB500 billion or the equivalent, and the daily quota is currently RMB20 billion or the equivalent.
Corporate credit bond market On 18 August 2021, PBOC, NDRC, MOF, CBIRC, CSRC and SAFE jointly issued high-level Guiding Opinions on Advancing the Reform, Opening-Up and High-Quality Development of the Corporate Credit Bond Market, setting out a general policy to unify the different rules for various types of credit bonds, promote clearer understanding of the different credit risks of governments and government-related entities, and continue promoting the internationalisation of the interbank and exchange-traded bond markets.
Credit rating reform On 6 August 2021, PBOC, NDRC, MOF, CBIRC and CSRC published a notice (only in Chinese) setting out requirements for credit rating agencies to strengthen their rating methodologies and systems, improve corporate governance and internal control mechanisms, and strengthen information disclosure. PBOC subsequently announced on 11 August that it has decided to pilot the repeal of requirements on credit rating for debt financing instruments issued by non-financial enterprises in the interbank market.
RMB internationalisation
Wealth Management Connect
PBOC published its 2021 report on RMB internationalisation (only in Chinese).
On 10 September, the Cross-boundary Wealth Management Connect (WMC) Pilot Scheme in the Guangdong-Hong KongMacao Greater Bay Area was launched. Individual investors in the three regions will be able to make use of the streamlined channel provided by the Cross-boundary WMC to invest in more diversified wealth management products across the border.
Competition in bond underwriting
Cryptocurrency On 24 September, various authorities in China issued a notice (only in Chinese) to deem activities related to cryptocurrency as illegal. Financial institutions must not provide services for cryptocurrency related activities, including account opening, fund transfer and settlement for cryptocurrencies.
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On 11 August 2021, NAFMII issued a notice (only in Chinese) requiring lead underwriters to report quarterly and annually on their quotations for bond underwriting services.
Bond lending businesses On 9 July 2021, PBOC published (only in Chinese) a consultation draft of the Administrative Measures for Bond Lending in the Interbank Bond Market. Contact: Yanqing Jia yanqing.jia@icmagroup.org
