Chinese regulators are moving to unify the country’s fragmented interbank and exchange bond markets. China’s bond market is the world’s second largest, worth some $15.4 trillion, but each part operates independently, overseen by two different regulators, reported Caixin.
The People’s Bank of China (PBOC) and the China Securities Regulatory Commission (CSRC) said in a joint statement on Sunday that qualified investors on the interbank market and on the Shanghai and Shenzhen exchanges will be able to buy and sell bonds listed on both markets through a “connect” mechanism. The interbank bond market is regulated by the PBOC, while the exchange bond market is supervised by the CSRC.
“This can be seen as a construction notice (of the connect mechanism),” a source at the PBOC said. The source added that connecting the bond market infrastructure can help unify prices.
The move is considered significant as a bid to boost liquidity and a step towards financial opening-up. “It’s noteworthy that the convenience of the facility can be fully enjoyed by overseas investment institutions, which will enhance the attractiveness of China’s bond market for overseas investors and further promote internationalization of the yuan,” analysts of Everbright Securities wrote in a Sunday researchnote.