China
bond market is now the second largest bond market worldwide, with a depository
balance over 130 trillion yuan, forming a market dominated by interbank and
exchange markets and supplemented by the over-the-counter market. China
Interbank Bond Market (CIBM) was established in 1997. After over 20 years of
evolution, CIBM has grown steadily in scale with enhanced financing function.
The infrastructure in this market has been continuously improved amid growing
diversity in market participants and trading instruments. The opening up of
CIBM is also proceeding steadily. By the end of December 2021, the total
depository balance of CIBM reached nearly 115 trillion yuan with market
participants nearly 3,800 in terms of incorporated entities, and total trading
volume over 1,400 trillion yuan. CIBM is the most important part of China bond
market and stands to be the main trading venue for CGBs, policy bank bonds and
NCDs which are popular among overseas investors.
China
bond market adheres to develop in market-oriented, law-based, and
internationalized way and its international influence has increased
significantly in recent years. With the support of overseas investors, Chinese
bonds have been successively included in the three major international bond
indexes. Chinese bonds have been included in Bloomberg Barclays Global
Aggregate Index (BBGA) and the JPMorgan Government Bond Index-Emerging Markets
(GBI-EM) in April 2019 and February 2020 respectively. In March 2021, FTSE
Russell announced the inclusion of Chinese government bonds in its World
Government Bond Index (WGBI), phased in over 36 months from October 2020.
Under
the guidance of the PBC, CFETS has jointly revised the China Bond Market
Handbook (2022) with NAFMII, SHCH, ICBC, ABC, BOC, HSBC, Orient Securities,
Citic Securities and BCCL in both Chinese and English. The Handbook reviews the
organizational structure, investment products, trading mechanisms, opening-up
policies, business processes of the China Bond Market, and puts the emphasis on
the bond market development achievements, reform measures, opening-up
optimization and infrastructures innovations. The Handbook further provides
details of the market entry processes, investment and trading mechanisms, and
FX conversion and hedging, which covers the issues of concern for foreign
investors. Major policies and regulations related to investment in China bond
market are also listed, which we hope would be of help for foreign investors to
further understand CIBM and the relevant matters on market admission.