The Shanghai Clearing House (SHCH) and Euroclear Bank have launched a new debt product amidst efforts to further open up China’s bond market to global investors.
SHCH and Euroclear jointly launched the Yulan Bond on Tuesday 8 December – a new asset class that derives its name from the floral symbol of Shanghai, and promises to better connect Chinese debt issuers with investors in Europe.
Euroclear Bank CEO Valerie Urbain said the new initiative has the “full support” of China’s central bank, and that it will serve to better integrate Chinese and European markets.
“As a financial market infrastructure, we have always maintained the strategy of bringing markets together through our open, flexible architecture to strengthen capital markets and connect local issuers with international investors,” she said.
SHCH will be responsible for issuance of Yulan bonds, while both it and Euroclear will be connected together to provide registration, custody and settlement services for issuers in China and investors abroad.
Yulan bonds will also come with electronic bond registrations to provide greater security and convenience to transaction parties.
SCHC is an interbank bond market clearing house based in Shanghai, and clears OTC financial instruments including bonds and FX, commodity and credit derivatives
As one of the three largest central securities depositories (CSD’s) in China, the SCHC comes under the regulation of the Chinese central bank as a systemically important financial market infrastructure.
Brussels-based Eurobank is part of the Euroclear Group, and provides settlement and other securities services for cross-border transactions including domestic and international bonds and equities between nearly 50 international markets.
In 2019 Chinese institutions issued a total of 690 bonds abroad to raise USD$217.8 billion, for a YoY rise of 33.29%.