China issues rules to lure foreign investors into bond market

BEIJING, Nov 18 (Reuters) – China’s central bank issued new rules on Friday to make the country’s bond market more attractive to foreign institutional investors, expanding currency hedging channels and making it easier for them to repatriate funds.

China will unify its rules on cash accounts and cash payments for foreign investors and improve the way it manages foreign exchange sales and purchases for foreign investors, according to the rules published on the central bank’s website.

The rules “will be conducive to further facilitating foreign institutional investors’ investment in China’s bond market,” the central bank said, announcing the latest of several steps taken over the past few months to make the bond market more attractive to foreign investors.

China will encourage foreign institutional investors to use the yuan in cross-border settlements, and complete deals through China’s Cross-Border Interbank Payment System (CIPs), according to the rules that will take effect from Jan. 1, 2023.

The changes will allow institutional investors to transfer funds held in their special accounts under the Qualified Foreign Institutional Investor (QFII) scheme and its yuan-denominated sibling, RQFII, and funds in their bond market special accounts.

In July, China said it would facilitate foreign investment in its bond market, pledging to cut service fees, improve overseas access to foreign exchange hedging, and streamline the process of opening accounts.

(Reporting by Beijing newsroom, Ellen Zhang and Kevin Yao; Editing by Raissa Kasolowsky & Simon Cameron-Moore)