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China mulls bond-trading platform expansion for foreign investor boost

China's central bank is considering a raft of rule changes to boost foreign on- and offshore bond trading, Pan Gongsheng, deputy governor of the People's Bank of China, told a conference in Hong Kong on July 3.

Under the changes being considered, foreign institutional investors would be allowed to trade onshore bond repurchase agreements and other derivatives through Bond Connect, a program launched in 2017 which lets overseas investors trade directly in China's interbank bond market through a trading platform managed by the Hong Kong stock exchange.

Pan noted that as of May-end, 918 foreign institutional investors owned 1.48 trillion yuan of bonds traded in China's onshore interbank market, of which 371 trade through the bond link with an average daily trading volume of between 3 billion yuan and 5 billion yuan.

Along with the Bond Connect expansion, Pan said transaction fees for foreign investors might also be cut, in a move aimed at boosting the domestic bond market, which is valued at about 78.6 trillion yuan.

The central bank is also considering rolling out more trading platforms and has been in talks with international bond trading platforms, including Bloomberg.

Finally, Pan said the central bank will soon provide more clarity around tax rules for foreign investors buying offshore bonds and will launch further guideline for issuers of panda bonds, yuan-denominated bonds sold in China's onshore market by a non-Chinese issuer.

The latest guideline will aim to simplify administrative procedures, improve disclosure requirements and encourage the participation of international ratings institutions, Pan added.

The central banker did not provide a timeframe for the plans.

As of July 2, US$1 was equivalent to 6.66 Chinese yuan.