The People’s Bank of China (PBoC) has launched a pilot project to allow more foreign participation in the country’s largely closed domestic interbank bond market, the Financial Times reported. Foreign central banks, lenders in Hong Kong and Macau that already conduct renminbi clearing and overseas banks that participate in the cross-border trade settlement scheme will be permitted to trade government and corporate debt on the US$2.8 trillion market. Foreign financial institutions are currently only able to invest renminbi they already hold onshore. The PBoC said the move is intended to “encourage cross-border renminbi trade settlement” and “broaden investment channels for renminbi flow back [to China].” Beijing is keen to internationalize the renminbi with a view to promoting it as a global reserve currency in the long term. Analysts expect the pilot program to be subject to strict investment quotas set by the PBoC.
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