CBIRC Opens China’s Government Bond Market to Foreign Banks

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China’s banking and insurance regulator has announced that foreign banks will be permitted to underwrite government bonds amidst an ongoing drive to further open up the country’s financial sector.

The “CBIRC Office Notice on Relevant Matters in Relation to Further Opening the Market to Foreign Invested Banks” (中国银行保险监督管理委员会办公厅关于进一步放宽外资银行市场准入有关事项的通知) published on 27 April states that foreign-owned or invested banks will in future be allowed to underwrite or sell government bonds without approval from the authorities in advance, as long as they subsequently satisfy reporting criteria.

“Foreign bank branches can lawfully undertake agency issuance, agency payment and underwriting of government bonds, without the need to obtain administrative licenses from the banking sector supervisory and regulatory authorities of the State Council,” said the Notice.

“[They] shall submit reports to the regulatory authorities within five working days of undertaking operations.”

The announcement arrives shortly after Chinese president Xi Jinping and central bank governor Yi Gang both stressed China’s commitment to further opening of the financial sector at the 2018 Boao Forum for Asia, highlighting in particular to the lifting of thresholds on foreign ownership of key financial institutions.

On the same date that CBIRC announced that it would relax restrictions on foreign banks underwriting Chinese government bonds, it also published the “CBIRC Measures for Accelerating the Implementation of Banking Sector and Insurance Sector Opening Up’ (银保监会加快落实银行业和保险业对外开放举措), as well as the “CBIRC Notice on Opening up the Business Scope for Foreign-invested Insurance Brokers ( 中国银行保险监督管理委员会关于放开外资保险经纪公司经营范围的通知).

The directives permit foreign bank branches to accept term deposits of under 500,000 yuan, as compare to one million yuan previously, as well as allows them to engage in renminbi or derivatives trading operations if their parent banks are so authorised.

Caixin reports that commercial banks from UK, Japan and Singapore as well as insurance firms from France and Germany have already submitted applications to CBIRC to open branches in major Chinese cities such as Shanghai, or increase their equity stakes in domestic financial institutions.

CBIRC said that it would give its approval to some of the applications when the time is appropriate.

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