In line with the Rules on Funds Invested by Overseas Institutional Investors in China’s Bond Market (Yin Fa [2022] No. 258), the China Foreign Exchange Trade System (“CFETS”) has enhanced the arrangements for direct investment in China’s bond market by overseas institutional investors. The details are as follows.

I. Access to the Interbank FX Market

Overseas institutional investors and overseas central banks and similar institutions that meet the criteria of the Announcement of the People’s Bank of China, the China Securities Regulatory Commission and the State Administration of Foreign Exchange ([2022] No. 4) and invest directly in China’s bond market (including the interbank bond market and exchange bond market) through multi-level custody, settlement agency, or other access channels may apply for membership in the interbank FX market to engage in spot FX purchase and sales and FX derivatives trading.

(I) Overseas Institutional Investors

Overseas banking institutional investors may apply to become a member of the interbank FX market to either trade directly in the interbank FX market or enter into prime brokerage to trade in the interbank FX market. Overseas non-bank institutional investors may apply to become a member of the interbank FX market to enter into prime brokerage to trade in the interbank FX market.

1. Application Procedures

(1) Applicants submit their application materials to CFETS.

(2) CFETS sends the membership agreement to the applicant if the submitted materials are completed and in the statutory form.

(3) The application signs the membership agreement and completes the necessary preparations (e.g., network connection and qualification training for at least two traders), upon which CFETS will issue a formal market entry notice and release the announcement on CFETS official website or through other channels.

2. Application Materials

(1) Copies of the institution’s registration documents and corresponding Chinese translations;

(2) CFETS RMB/FX Membership Application Form, CFETS Network Connection Application Form, and CFETS FX Trading System Digital Certificate Application Form;

(3) A letter of commitment, in which the applicant undertakes to engage in FX transactions strictly for hedging its FX risk exposures in the interbank bond market (if it plans to trade derivatives) and fulfill its reporting obligations by submitting the relevant information as required by CFETS;

(4) Internal operation procedures and risk management protocols for trading the relevant products of the interbank FX market;

(5) Prime Brokerage Application Form, if applicable; and

(6) Other materials required by CFETS.

The foregoing application materials and completed forms should be stamped with official seal of the institution or signed by authorized signatory (along with the letter of signature authorization). Existing members of the interbank RMB/FX market do not need  to re-apply for membership and will only need to submit the letter of commitment in item (3) above.

(II) Overseas Central Banks and Similar Institutions

Overseas central banks and similar institutions such as central banks, monetary authorities, official reserve administrative agencies, international financial institutions, and sovereign wealth funds are governed by the Notice of the PBC on Access of Foreign Central Banks and Similar Institutions to the Interbank Foreign Exchange Market (PBC Announcement [2015] No.31) in their participation of the interbank FX market.

II. Filing Requirements for Financial Institution-to-Customer Market

Overseas institutional investors and overseas central banks and similar institutions that meet the criteria of the Announcement of the People’s Bank of China, the China Securities Regulatory Commission and the State Administration of Foreign Exchange ([2022] No. 4) and invest directly in China’s bond market (including interbank bond market and exchange bond market) may conduct spot FX purchase or sales and trade FX derivatives with domestic financial institutions of China as their clients after filing with CFETS.

(I) Filing Procedures

1. After signing the relevant derivatives agreement (if the filer plans to trade derivatives) and before trading in the interbank FX market, the overseas institutional investor or overseas central bank or similar institution should file with CFETS the list of their selected domestic financial institutions of China, either by itself or through a custodian or settlement agent.

2. Upon receiving the filing form, CFETS will notify the selected domestic financial institutions of China and grant them access to the systems for information reporting.

3. Any change to the list of selected domestic financial institutions of China should be filed with CFETS within three working days.

(II) Filing Materials

1. Filing form

(1) The name and contact information of the selected domestic financial institutions of China;

(2) Confirmation of the signing of derivatives agreements with the relevant domestic financial institutions of China (if applicable).

2. Other materials required by CFETS.

The foregoing filing materials and completed forms should be stamped with official seal of the filer or signed by authorized signatory (along with the letter of signature authorization).

III. Information Reporting

(I) Reporting Entities

Overseas institutional investors participating in the interbank FX market should report information themselves. Overseas institutional investors and overseas central banks and similar institutions that participate in the financial institution-to-customer market should report information through the selected domestic financial institutions of China with which they trade.

(II) Reporting Contents

The reporting contents include but are not limited to the date of a transaction, the name and country/region of the overseas institutional investor or overseas central banks and similar institution, trading product, trading direction, trading amount, exchange rate, purpose/source of the transaction, and event type.

(III) Reporting Rules

A reporting entity should submit the relevant information through the CFETS system on a daily basis. The reporting cut-off time is 12:00PM of the next trading day. All times refer to Beijing time (GMT+8).

IV. Miscellaneous

This Announcement takes effect as of the date of release. The Notice on the Enhanced Management of Foreign Exchange Risk for Foreign Institutional Investors in the Interbank Bond Market (CFETS [2020] No. 7) expires on the same day.

V. Contact Information

Filing questions: 400 978 7878 *1*2*1, (021) 2316 5027;

Trading questions: (021) 6329 8988 ext. 3535, (021) 3858 5304;

Email: fx_mkt@chinamoney.com.cn

China Foreign Exchange Trade System

April 17, 2023