China opens huge bond market to foreign investors

Author: AFP, ReutersWed, 2017-07-12 03:00ID: 1499027677434061800BEIJING: China will allow foreign investors direct access to its massive bond market from Monday, the People’s Bank of China (PBoC) said.A platform allowing one-way “northbound” investments from Hong Kong into the Chinese bond market will go into “experimental operation” on July 3, the PBoC and the Hong Kong Monetary Authority (HKMA) said in a joint statement on Sunday, which came as Hong Kong marked the 20th anniversary of its handover to China by Britain.Access to the market will be restricted to “qualified investors” including central banks and sovereign wealth funds but also commercial banks, insurers, brokerage firms and investment funds, according to the PBoC.China’s debt market is the third largest in the world, with a cumulative value of about $10 trillion according to Bloomberg news agency.However, this booming market has been virtually out of reach for foreign investors, who currently hold only a small portion of the bonds issued in China — less than 1.5 percent according to Bloomberg estimates.China has moved gradually toward opening its capital markets.In 2014, a trading link between the Hong Kong and Shanghai stock exchanges was introduced, and another was started in December 2016 between Hong Kong and Shenzhen, China’s other exchange.The links give foreigners some access to China-listed shares, while also allowing Chinese firms to buy Hong Kong-traded stocks.The bond move is the latest in a series of liberalization pledges from China, which has regularly been hit by complaints from foreign companies and trading partners about access to its markets.Earlier this week, the government relaxed curbs on foreign investment, removing 30 entries from a list to allow more access to its services, manufacturing and mining sectors. Beijing left 63 items restricted or off-limits to foreign investment.“This year China’s foreign investment has seen negative growth, this is something we need to closely monitor,” Premier Li Keqiang said, in comments carried on the website of China’s Cabinet, known as the State Council. “We must eliminate barriers to investment and increase the confidence of both domestic and foreign investors.”China needs to “eliminate barriers” to foreign investment and create jobs to spur growth in the country, the world’s second-largest economy, Li said.It takes longer for foreign firms to register and the time taken for goods to pass through customs is much slower versus global standards, Li added, acknowledging this had to change.China’s foreign direct investment (FDI) in May fell 3.7 percent from a year earlier.While China’s economy grew slightly faster than expected in the first quarter, many analysts expect it to lose steam later in the year as the impact of earlier stimulus measures starts to fade and as local authorities step up their battle to rein in hot housing prices.“Development is the key to resolving all our problems, it is the root of maintaining social stability and it is the cornerstone in order for the Communist Party to hold onto power,” Li said.
Main category: Business & Economy

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