China’s financial regulators have tightened rules for bond trading, a move that may lead to a sell-off on the bond market in the short term but will help reduce excessive leverage and reduce risk in the country’s financial system, according to China Daily.
The new rules, produced by the People’s Bank of China in collaboration with China’s banking, securities and insurance regulators, ban financial firms from engaging in so-called drawer agreements, a type of under-the-table deal that allows them to circumvent regulatory requirements on using borrowed money to invest in bonds.
The coordinated move by the regulators is another sign that China is cracking down on irregular activities in the financial sector, which the government has made one of its top priorities for 2018. The new regulation also aims to avoid a repeat of the $2.4 billion bond scandal involving Chinese firm Sealand Securities in December 2016, China Daily said.