The Shanghai Stock Exchange is planning to introduce new bond repurchase agreements (repos) and is also being considered as the site for a revival of treasury bond futures in China.
The new bond repurchase agreements will allow the short selling of treasury bonds, helping investors to hedge against risk and also improving market liquidity.
China already has a sizeable bond repo market but rules prohibit short selling by requiring bonds to be deposited at the China Government Securities Depository Trust & Clearing for the duration of the agreements.
While the new bond repurchase agreements will probably be rolled out this year, political resistance meant treasury futures were unlikely to re-emerge until next year at the earliest.
China's bond markets presently allow just spot trades and repurchase agreements.