BEIJING/HONG KONG, April 18 China's central bank
is considering opening a new channel for foreign institutions to
invest in the domestic bond market, two sources familiar with
its deliberations said, potentially widening access to the
country's largely closed capital markets.
Such a move would go beyond a proposal, reported by Reuters
on Thursday, for the People's Bank of China (PBOC) to give
foreign state investors - central banks and sovereign wealth
funds - and multilateral institutions such as the World Bank
greater scope to invest in the interbank bond market.
On Friday, the sources said the PBOC was also considering
giving greater market access to private foreign institutions.
Reuters was unable to reach the central bank for comment.
The sources said the plan was discussed at a recent meeting
between the central bank and senior banking executives in
Beijing, but did not give further details on how the rules would
be relaxed or any contemplated timeline for implementation.
Such a move could increase access to the world's
third-largest bond market for foreign banks, insurers, hedge
funds, and other asset managers, though the sources did not
specify which specific types of institutions could gain access.
Offshore institutions owned about 191 billion yuan ($30.7
billion)of bonds at the end of March, or less than 1 percent of
total bonds outstanding, according to Reuters analysis of
figures published by the China Central Depository Trust and
Clearing Co Ltd.
Under its reform agenda, the government last year pledged to
open up capital markets and increase cross-border capital flows,
steps which economists have said could improve capital
allocation by reducing distortions in financial markets.
Foreign investors are currently allowed to participate in
the bond market through the Qualified Foreign Institutional
Investor (QFII) programme, which controls foreign access to
Chinese financial assets through a quota system.
When it was launched in 2002, QFII only permitted access to
stock exchanges. The program was expanded last year to include
the interbank bond market, but market participants say QFII
investors still mainly used it to buy equities, in part because
most QFIIs gained their approval when stocks were virtually the
Foreign central banks with currency swap agreements with the
PBOC and commercial banks involved in clearing offshore yuan
transactions can also apply for interbank bond market quotas
through a separate channel. The size of those quotas is not
($1 = 6.2190 Chinese Yuan)
(Reporting by the Beijing and Hong Kong Newsrooms; Writing by
Gabriel Wildau; Editing by John Mair)