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China frees up $10 trillion bond market to counter slowing growth

A bond issue by Agricultural Development Bank of China was the first deal completed under the scheme

AFP | PTI  |  Shanghai 

Perpetual bonds offer higher coupon but carry recall risk

on Monday opened up its $10 trillion bond market to foreign investors, in the latest liberalisation move by as it seeks to draw in more fund flows as it battles slowing economic growth.

The new conduit comes via Hong Kong, where "qualified investors" will be able to buy debt in -- the world's third-largest bond market after the United States and


Qualified investors include central banks, sovereign wealth funds, and other major financial institutions, according to the People's of (PBoC) and the Monetary Authority, who jointly announced the platform on Sunday.

Their statement said the "bond connect" arrangement between the and mainland Chinese markets went into "experimental operation" from Monday.

The announcement came on a weekend in which and marked the 20th anniversary of Britain's handover of the southern Chinese financial centre back to in 1997.

"The bond connect is an important move for the central government to support Hong Kong's development and promote cooperation between the mainland and Hong Kong," the PBoC said Monday.

It will "promote Hong Kong's long-term prosperity and stability and provide a more convenient investment channel for overseas investors. It will also steadily push forward the opening up of China's financial market".

The growing Chinese bond market has been virtually out of reach for foreign investors, who currently hold less than 1.5 per cent of bonds issued in China, according to estimates by Bloomberg.

The new platform mirrors previously established link-ups between the share markets of and mainland that now allow foreign and Chinese investors to buy shares in the each other's markets.

Those links give foreigners some access to China-listed shares, while also allowing Chinese firms to buy Hong Kong- traded stocks.

The new bond connect scheme, however, currently only allows foreign investors to buy Chinese debt.

HSBC said it completed its first deal under the new arrangement as underwriter for a bond issue by Agricultural Development of

"The enhanced ease of investment under Bond Connect will attract more overseas funds, creating a more diversified investor base and further enhancing the market's size and depth," Helen Wong, HSBC Greater Chief Executive, said in a statement.

"This will help pave the way for bonds to be included in major global bond indices in the future."

has for years faced foreign complaints about restricted access to its markets, but has recently made a series of liberalisation pledges partly to expand its global market influence.

First Published: Mon, July 03 2017. 16:33 IST
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