THE INTER-BANK BOND
MARKET IN THE
PEOPLE’S REPUBLIC OF
CHINA
AN ASEAN+3 BOND MARKET GUIDE
AUGUST 2020
THE INTER-BANK BOND
MARKET IN THE
PEOPLE’S REPUBLIC OF
CHINA
AN ASEAN+3 BOND MARKET GUIDE
AUGUST 2020
Contents
Tables and Figures v
Foreword vii
Acknowledgments viii
Abbreviations ix
I. Overview 1
A. Overview of Bond Market Segments 1
B. Introduction to the China Inter-Bank Bond Market 3
C. Outline of the Investment Schemes to Open the Capital Market 12
D. Market Opening Milestones in the China Inter-Bank Bond Market 14
since 2005
II. Legal and Regulatory Framework 19
A. Legal Tradition 19
B. English Translation 19
C. Legislative Structure 20
D. Inter-Bank Bond Market Regulatory Structure 23
E. Regulatory Framework for Debt Financing Instruments 30
F. Debt Financing Instrument Issuance Regulatory Processes 31
G. Continuous Disclosure Requirements in the Inter-Bank Bond Market 61
H. Self-Regulatory Organizations in the Inter-Bank Bond Market 63
I. Licensing and Admission of Inter-Bank Bond Market Participants 66
J. Membership Rules of the Inter-Bank Bond Market 66
K. Rules Related to Disclosure and Trading of Debt Financing Instruments 68
L. Market Entry Requirements (Nonresidents) 68
M. Market Exit Requirements (Nonresidents) 69
N. Regulations and Limitations Relevant for Nonresidents 70
O. Regulations on Credit Rating Agencies 80
P. Regulations on Bond Pricing Agencies 82
III. Inter-Bank Bond Market Characteristics 83
A. Definition of Securities and Debt Financing Instruments 83
B. Types of Bonds and Notes 85
C. Money Market Instruments 94
D. Segmentation of the Market 98
E. Methods of Issuing Bonds and Notes (Primary Market) 100
F. Governing Law and Jurisdiction (Bond and Note Issuance) 106
G. Language of Documentation and Disclosure Items 106
H. Registration of Debt Financing Instruments in the Inter-Bank Bond Market 107
I. Listing of Debt Financing Instruments 109
J. Methods of Trading Bonds and Notes (Secondary Market) 109
K. Bond and Note Pricing and Valuation 110
L. Transfers of Interests in Bonds and Notes 113
M. Market Participants 116
N. Definition of Professional Investors 130
O. Credit Rating Requirements 132
P. Financial Guarantee Institution 135
Q. Market Features for Investor Protection 135
R. Debt Financing Instrument Holder Meeting 138
S. Bond Trustee or Trustee 140
T. Bankruptcy and Insolvency Provisions 141
U. Event of Default and Cross-Default 143
IV. Bond and Note Transactions and Trading Market Infrastructure 145
A. Inter-Bank Bond Market 145
B. Trading Platforms 147
C. Trade Reporting 150
D. Market Monitoring and Surveillance 151
E. Bond Information Services 151
F. Yields, Yield Curves, and Bond Indexes 155
G. Repo Market 163
H. Securities Lending and Borrowing 167
I. Debt-Financing-Instrument-Related Derivatives in the Inter-Bank 168
Bond Market
V. Description of the Securities Settlement System 171
VI. Fees and Taxation in the Inter-Bank Bond Market 172
A. Costs Associated with Bond and Note Issuance 172
B. Ongoing Costs for Issuers of Debt Financing Instruments 175
C. Costs for Deposit and Withdrawal of Debt Financing Instruments 176
D. Costs for Account Maintenance at the Central Securities Depositories 176
E. Costs Associated with Debt Financing Instrument Trading in the 177
Inter-Bank Bond Market
F. Costs for Settlement of Bond and Note Transactions and Transfers 178
G. Taxation Framework 180
VII. Market Size and Statistics 184
VIII. Presence of an Islamic Bond Market 185
IX. Challenges and Opportunities in the Inter-Bank Bond Market 186
A. Challenges in the Inter-Bank Bond Market 186
B. Opportunities in the Inter-Bank Bond Market 190
X. Recent Developments and Future Direction 192
A. Recent Developments 192
B. Future Direction 197
Appendixes
1 Compliance with International Principles 200
2 Practical References 202
3 List of Laws and Regulations for the Inter-Bank Bond Market 203
4 Glossary of Technical Terms 208
5 Chinese Technical Terms and Their Interpretations 212
Tables and Figures
Tables
Major Bond Market Segments in the People’s Republic of China 2
Debt Financing Instruments Issued in the CIBM and Deposited with CCDC 7
in 2019
Overview of Market Access Routes into the China Bond Market 13
Bond Market Legislative Structure in the People’s Republic of China 21
Examples of China Inter-Bank Bond Market Legislation by Legislative Tier 21
Supervisory Institutions and Instruments under their Remit 23
Bond Types, Issuer Categories, and Related Supervisory Institutions 24
Overview of Regulatory Framework for Debt Financing Instruments in the 30
Inter-Bank Bond Market
Authorities in the Regulatory Process for the Inter-Bank Bond Market by 32
Issuer Type
Registration Documents Required for a Public Offering and Private 49
Placement of Panda Bonds
Documentation Requirements for a Private Placement Registration 53
NAFMII Membership by Category and Details 64
QFII Quotas Granted by Economy or Region 72
Supervising Institutions for the QFII and RQFII Schemes 73
RQFII Quotas Granted by Economy and Region 75
Milestones Related to Nonresident Issuer and Investor Participation 76
Credit Rating Agencies Active in the China Bond Market 81
Government and Related Bonds Deposited by Market Segment 85
Enterprise Bonds Depository Balance by Market Type at the End of 2019 90
SME Collective Notes Issuance and Outstanding Deposits at SHCH 91
Debt Financing Instrument Issuance in the CIBM 98
Fungibility of Debt Financing Instrument among Major Market Segments 115
Business and Financial Indicators for Category I Issuers 118
Overview of Inter-Bank Bond Market Bond Accounts at CCDC 119
Overview of Inter-Bank Bond Market Bond Accounts at SHCH 120
Credit Rating Regulations and Provisions for the Inter-Bank Bond Market 132
Credit Rating Ranks for Short-Term Bonds in the Inter-Bank Bond Market 133
Credit Rating Ranks For Medium-Term and Long-Term Bonds in the 133
Inter-Bank Bond Market
4 CFETS Trading Platform Hours 148
Debt Financing Instrument Registration Fees at CCDC 174
Debt Financing Instrument Registration Fees at SHCH 175
CCDC Account Opening and Maintenance Fees 177
SHCH Account Maintenance Fees 177
China Foreign Exchange Trading System Transaction Fees for Debt 178
Financing Instruments
Settlement Charges at CCDC 179
Settlement Charges at SHCH 180
Summary of Tax Treatment for Foreign Investors in the China 181
Bond Market
Summary of Tax Treatment of Bond Investments by Domestic Institutional 181
Investors
A3 List of Laws and Regulations for the Inter-Bank Bond Market 203
Figures
Bonds Outstanding in the PRC by Major Bond Market Segment 4
Bond Issuance in the PRC by Major Bond Market Segment 5
Bond Issuance in the PRC by Major Bond Market Segment—Including NCD 5
Deposited at SHCH
Bond Issuance in the CIBM and Deposited with CCDC by Instrument Type 6
Debt Financing Instrument Issuance in the CIBM and Deposited with SHCH 8
by Type
Debt Financing Instrument and NCD Issuance in the CIBM 8
Cash Bond, NCD, Repo, and Bond Lending Volume in the PRC by Major 9
Bond Market Segment
Repo and Bond Lending Transaction Volume by Major Bond Market 11
Segment
2 Regulatory Process Map—Debt Financing Instrument Issuance in the 33
Inter-Bank Bond Market
Inter-Bank Bond Market Bond Traded Prices at CFETS 111
Over-The-Counter Bond Quotations at ChinaBond 112
Shanghai Clearing House Bond Valuation Web Page 113
Foreign Holdings of Chinese Renminbi-Denominated Bonds 123
Debt Instrument Trading Volume in the Inter-Bank Bond Market 147
Example of Disclosure Information on the China Foreign Exchange Trade 152
System Website
Debt Securities Information on the CCDC Website 153
The People’s Bank of China’s Website with Selected Debt Instrument 154
Information in English
Example of Market Data in Monthly Bulletin on Shanghai Clearing House 155
Bond Market
China Foreign Exchange Trade System Closing Yield Curves 156
ChinaBond Yield Curve Web Page 157
Shanghai Clearing House Yield Curve Web Page 158
People’s Republic of China’s Government Bond Yield Curve on 159
Asianbondsonline
Bond Indexes Provided by CFETS 160
ChinaBond Composite Bond Index 161
SHCH Bond Index Web Page 162
Bond Repo Transaction Volume by Bond Market Segment 164
Features of a 2-Year Treasury Bond Futures Contract on CFFEX 169
Foreword
The Asian Development Bank is working closely with the Association of Southeast Asian
Nations (ASEAN) and the People’s Republic of China, Japan, and the Republic of Korea—
collectively known as ASEAN+3—to develop local currency bond markets and facilitate
regional bond market integration under the Asian Bond Markets Initiative for development of
the region’s resilient financial systems.
Thanks to the efforts of member governments, local currency bond markets in ASEAN, the
People’s Republic of China, and the Republic of Korea have grown rapidly, with the total
outstanding amount of bonds reaching more than USD16 trillion at the end of 2019. Despite
this remarkable development, intraregional investment in bond markets has remained subdued.
As the Asian Development Bank has estimated that developing Asia will need to invest
USD26 trillion from 2016 to 2030 (or
trillion per year) in infrastructure to support continued growth, it is critical to mobilize
the region’s vast savings for the enormous investment needs. As an essential platform for such
resource mobilization, financial markets in ASEAN+3 need to be more harmonized for better
integration. Also, regional efforts should support developing member countries at the early
stages of market development.
The ASEAN+3 Bond Market Forum (ABMF) was established with the endorsement of the
ASEAN+3 finance ministers in 2010 as a common platform to foster the standardization of
market practices and harmonization of regulations relating to cross- border bond transactions
in the region. As an initial step, ABMF published the ASEAN+3 Bond Market Guide in 2012,
which was welcomed as the first official information source offering a comprehensive
explanation of the region’s bond markets.
Since publication of the ASEAN+3 Bond Market Guide, bond markets in the region have
continued to develop. ABMF recognizes the need for revisions to the guide to reflect these
changes, though it is never an easy task to keep up with rapid changes in the markets. This
report is an outcome of the strong support and contributions of ABMF members and experts,
particularly from the People’s Republic of China. The report should be recognized as a joint
product to support bond market development among ASEAN+3 members. It is our hope that
the revised ASEAN+3 Bond Market Guide will facilitate further development of the region’s
bond markets, contribute to increased intraregional bond transactions, and promote efficient
capital allocation within the region.
Yasuyuki Sawada
Chief Economist and Director General
Economic Research and Regional Cooperation Department Asian
Development Bank
Acknowledgments
The ASEAN+3 Bond Market Guide was first published in 2012 as the initial output of Phase 1
of the ASEAN+3 Bond Market Forum (ABMF).1 Across the region, domestic bond markets,
including the bond market in the People’s Republic of China (PRC), have experienced
tremendous development over the past 8 years. Now in Phase 3, ABMF would like to share, in
the public domain, information on these developments by publishing an update on the China
bond market, with a particular focus on the Inter- Bank Bond Market.
The ABMF Sub-Forum 1 team—comprising Satoru Yamadera (Principal Financial Sector
Specialist, Asian Development Bank [ADB], Economic Research and Regional Cooperation
Department); Kosintr Puongsophol (Financial Sector Specialist, ADB, Economic Research
and Regional Cooperation Department); and ADB consultants Shigehito Inukai and Matthias
Schmidt, together with ABMF International Expert Hirohiko Suzuki—would like to stress the
significance and magnitude of the contributions made by ABMF national members and
experts from the PRC, including the China Central Depository & Clearing Co., Ltd.; China
Foreign Exchange Trade System; and Shanghai Clearing House Co., Ltd.
The ADB team would also like to express its special thanks to the Financial Market
Department of the People’s Bank of China and to a number of ABMF International Experts,
including Citibank ., HSBC, and SWIFT, as well as to China International Capital
Corporation Limited. These policy bodies, regulatory authorities, and market institutions
generously gave their time for market visit meetings, discussions, and follow-up. They also
reviewed and provided inputs on the draft ASEAN+3 Bond Market Guide for the Inter-Bank
Bond Market in the People’s Republic of China over the course of ABMF Phase 3.
No part of this report represents the official views or opinions of any institution that
participated in this activity as an ABMF member, observer, or expert. The ABMF Sub-
Forum 1 team bears sole responsibility for the contents of this report.
August 2020
ASEAN+3 Bond Market Forum
1 ASEAN+3 refers to the 10 members of the Association of Southeast Asian Nations (ASEAN) plus the
People’s Republic of China, Japan, and the Republic of Korea.
Abbreviations
ABMF ASEAN+3 Bond Market Forum NAFMII National Association of Financial
ABN asset-backed notes NCD
Market Institutional Investors
negotiable certificate of deposit
ABS asset-backed securities
ADB Asian Development Bank NDRC National Development and Reform
AMBIF ASEAN+3 Multi-Currency Bond OTC
Commission over-
the-counter
ASEAN
Issuance Framework Association
of Southeast Asian PBOC People’s Bank of China
ASEAN+3
Nations
Association of Southeast Asian PDF portable document format
CBIRC
Nations plus the People’s Republic of
China, Japan, and the Republic of Korea
China Banking and Insurance
PFB policy bank financial bond
CBRC
Regulatory Commission
China Banking Regulatory PPN private placement notes
CCDC
Commission
China Central Depository & Clearing PRC People’s Republic of China
CFETS
Co., Ltd. (ChinaBond)
China Foreign Exchange Trade QFII Qualified Foreign Institutional
CFFEX
System
China Financial Futures Exchange QOII
Investor
Qualified Overseas Institutional
CIBM China Inter-Bank Bond Market RMB
Investor
Chinese renminbi
CIT corporate income tax RQFII Renminbi Qualified Foreign
CNY Chinese renminbi (ISO code) SAFE
Institutional Investor
State Administration of Foreign
CP commercial paper SCP
Exchange
super short-term commercial paper
CRA credit rating agency SF1 Sub-Forum 1 of ABMF
CSD central securities depository SF2 Sub-Forum 2 of ABMF
CSI China Securities Index Co., Ltd SHCH Shanghai Clearing House Co., Ltd.
CSRC China Securities Regulatory SMEs small and medium-sized enterprises
DCM-
Commission
Debt Capital Market Filing Analysis SOE state-owned enterprise
FANS Notification System
DTA double taxation agreement SPV special purpose vehicle
EXIM Export–Import Bank of China SRO self-regulatory organization
FSDC Financial Stability and Development USD United States dollar (ISO code)
IFRS
Commission
International Financial Reporting VAT value-added tax
MOF
Standards
Ministry of Finance WHT withholding tax
MTN medium-term notes
USD1 =
(PBOC rate on 31 December 2019)
Overview
A. Overview of Bond Market Segments
The bond market in the People’s Republic of China (PRC) is divided into three market
segments: (i) the China Inter-Bank Bond Market (CIBM), (ii) the exchange bond market, and
(iii) the commercial banks’ counter market. Free-trade zone bonds are not so much a separate
market segment as a distinct bond type in the CIBM. Considering the scale of these market
segments, the CIBM and the exchange bond market are the dominant segments (Table );
the commercial banks’ counter market in effect represents a market segment for on-selling
debt financing instruments issued and traded in the CIBM to general and retail investors.
Due to the separate legal, regulatory, and institutional frameworks of the respective market
segments, each segment is recognized as a market in its own right; at the same time,
however, these market segments complement, interconnect with, and complete each other.
This bond market guide describes the CIBM as one of the two main market segments in the
PRC accessible to foreign investors.
The scale and style of regulation differs between the CIBM and the exchange bond market.
The markets have historically adopted different regulatory approaches from one another. For
example, under the supervision of the People’s Bank of China (PBOC), the National
Association of Financial Market Institutional Investors (NAFMII) admits and administers
active market participants and intermediaries in the CIBM and facilitates the registration of
debt financing instruments issued by nonfinancial enterprises, pursuant to its mandate as the
market’s self-regulatory organization (SRO). The PBOC admits foreign institutional investors
to the CIBM via a number of investment avenues and also approves issuances by financial
institutions.
In comparison, in the exchange bond market, the China Securities Regulatory Commission
(CSRC) and the Securities Association of China (SAC), as SROs, and the stock exchanges, as
listing and trading authorities, cooperate on regulations with each covering different regulatory
objectives. Listing and trading in the exchange bond market falls under the unified guidance of
CSRC, which resulted in the establishment of similar and consistent rules at the Shanghai
Stock Exchange and the Shenzhen Stock Exchange.
In another example of rules and regulations that differ between these markets, bonds issued in
the exchange bond market are legally defined as securities under the Securities Law, while
many such instruments issued in the CIBM are not regarded as securities and instead are
referred to as debt financing instruments. This is due to the legacy of the different regulatory
systems in the PRC. Consequently, this bond market guide uses the term debt financing
instruments instead of debt securities.
Table : Major Bond Market Segments in the People’s Republic of China
Feature
Inter-Bank Bond Market
(over-the-counter market)
Commercial
Banks’
Counter
Market Exchange Bond Market
Main
regulator
People’s Bank of China (PBOC) PBOC China Securities Regulatory
Commission (CSRC)
Self-
regulatory
organization
(SRO)
National Association of Financial
Market Institutional Investors
(NAFMII)
. Securities Association of
China (general SRO);
Shanghai Stock Exchange
(SSE) and Shenzhen Stock
Exchange (SZSE) (listing and
trading authority SROs)
Trading China Foreign Exchange Trade
System (CFETS)
Commercial
banks
SSE and SZSE;
National Equities Exchange
and Quotations
Central
securities
depository
China Central Depository & Clearing
Co., Ltd. (CCDC or ChinaBond);
Shanghai Clearing House (SHCH)
Commercial
banks
China Securities Depository
and Clearing Co., Ltd. (CSDC
or Chinaclear)
Available
debt
securities or
debt
financing
instruments
CCDC only: government bonds
(Treasury bonds), local government
bonds, central bank bills, enterprise
bonds, collective bonds, financial
bonds (commercial bank bonds)
SHCH only: medium-term notes,
commercial paper, super short-term
commercial paper, private placement
notes, SME collective notes, asset-
backed notes, project revenue notes;
Panda bonds, green debt financing tools,
project income notes, special- drawing-
rights-denominated bonds; negotiable
certificates of deposit;
Government
bonds,
local
government
bonds, policy
bank financial
bonds (applies
to both book-
entry and
certificated
bonds)
Government bonds (Treasury
bonds), local government
bonds, policy bank financial
bonds， government-backed
(agency) bonds (., railway
bonds), enterprise bonds,
securities company bonds and
short-term notes, corporate
bonds and exchangeable
corporate bonds, convertible
bonds, asset-backed securities,
repurchase agreements
CCDC and SHCH: policy bank
financial bonds, financial bonds (non-
bank financial institution bonds),
government-backed (agency) bonds;
asset-backed securities; repurchase
agreements
Key
investors
Institutional investors (., overseas
central banks, international financial
organizations, sovereign wealth funds,
banks, funds, insurance companies, rural
credit cooperatives, securities
companies, financial companies,
enterprises, overseas institutions, QFII
and RQFII (since May 2013), QOII
(since February 2016)
Individual
investors,
small
enterprise
investors
Small and medium-sized
institutional investors (.,
securities companies,
insurance companies, funds,
financial companies, qualified
individual investors,
enterprises), QFII and RQFII,
individuals (very limited)
. = not applicable, QFII = Qualified Foreign Institutional Investor, QOII = Qualified Overseas Institutional
Investor, RQFII = Renminbi Qualified Foreign Institutional Investor, SME = small and medium-sized enterprises.
Source: Deutsche Bank (partly amended by ASEAN+3 Bond Market Forum [ABMF] Sub-Forum 1 team
compilation based on ABMF member input).
Regardless of which market they are issued in, the economic nature of these instruments is
basically the same. To prevent users and participants in these two main markets from
experiencing any disadvantage, increased cooperation between the supervisory authorities for
both markets is intended to gradually improve the comparability of their regulatory
environments (see also section in this chapter).
The Financial Stability and Development Commission (FSDC), which was established in 2017
to support this purpose, is a reflection of the joint efforts of policy makers in the PRC (see also
Chapter ).
At the same time, an increase in transactions between these two main markets has also been
observed, particularly among professional participants, including both issuers and investors.
The technical term used for this type of transaction is cross- market transfer (please see
Chapter or Chapter for a detailed description of this market feature). Qualified
Overseas Institutional Investors (QOII) are able to carry out trading in the CIBM as well as in
the exchange bond market via securities companies, who are both stock exchange members
and designated bond settlement agents in the CIBM.
B. Introduction to the China Inter-Bank Bond Market
The CIBM is an over-the-counter (OTC) market in which admitted participants agree on trades
using the common trading platform provided by the China Foreign Exchange Trade System
(CFETS), trade using a market-maker, or conclude trades between themselves via phone or
other means. General or individual investors cannot directly participate in this market.
The CIBM started in June 1997, originally as a traditional interbank market between the PBOC
and commercial banks, following commencement of the PBOC’s open market operation. The
origins of some of the institutions and technical terms (see Appendix 5) used in the CIBM
today go back to this original purpose of the market. For example, CFETS is also known as the
National Interbank Funding Center (and uses Chinamoney as its web handle), which describes
its function in the classical interbank market to this day; however, for the purpose of this bond
market guide, the role of the National Interbank Funding Center is not directly relevant and,
hence, need not be described here in further detail.
The origins of the CIBM also provide context for the ongoing issuance and trading of
negotiable certificates of deposit (NCD), which might be considered a bank product or money
market instrument in many other jurisdictions and not tradable in the bond market. Since
inception, the purpose of the interbank market has gradually expanded, with new instrument
types added over time to support the financing of participating public sector entities and
banking institutions, as well as the admission of many additional participants beyond the
original constituents, resulting in the CIBM—with the emphasis on China Inter-Bank Bond
Market—as it appears today.
The CIBM is presently the largest bond market segment in the PRC. Debt instruments issued,
traded, and settled in the CIBM consist of mainly public sector bonds, held by the China
Central Depository & Clearing Co., Ltd. (CCDC); and supplementary private sector
instruments, held by the Shanghai Clearing House Co., Ltd. (SHCH). More than half of the
private sector instruments deposited with SHCH at the end of 2019 were money market
instruments such as NCD, super short-term commercial paper (SCP), and commercial paper
(see section 1 for more details).
The CIBM is considered an institutional market by its participants; general or individual
investors are not able to access this market directly. At the same time, access to publicly
offered debt financing instruments issued and traded in the CIBM for general
Figure : Bonds Outstanding in the PRC by Major Bond Market Segment
CCDC = China Central Depository & Clearing Co., Ltd; CNY = Chinese renminbi; CSDC = China Securities Depository and Clearing
Co., Ltd; PRC = People’s Republic of China; SHCH = Shanghai Clearing House; SSE = Shanghai Stock Exchange; SZSE = Shenzhen
Stock Exchange.
Notes: Bonds at par value. Data for CCDC include all debt instruments settled at CCDC; data for SHCH do not include negotiable
certificates of deposit.
Sources: CCDC, CSDC, SHCH, SSE, and SZSE.
2013 2014 2015 2016 2017 2018 2019
10,000
0
Exchange bond market
(SZSE, CSDC)
Exchange bond market
(SSE, CSDC)
Inter-Bank Bond Market
(SHCH)
Inter-Bank Bond Market
(CCDC)
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
or retail investors is possible via the commercial banks’ counter market, in which
commercial banks on-sell bonds and notes acquired in the CIBM to individual and other
investors that cannot participate in the CIBM directly. This practice, in effect, makes the
commercial banks’ counter market an extension of the CIBM and ensures that issuers
continue to issue via public offerings for debt financing instruments to be eligible for the on-
selling to general or retail investors. In addition, retail investors can access the NCD market
indirectly, via a mobile phone investment in money market fund products, such as those
offered by online payment providers.
CIBM participants include banks, other financial institutions (such as fund management
companies and insurance companies), and nonfinancial institutions. Issuers, intermediaries, and
service providers must be registered with NAFMII—in fact, they must acquire NAFMII
membership—to participate in the CIBM, while end- investors need not unless they want to
qualify for specific issuances of private placement notes (PPN). The CIBM and its participants
are overseen and regulated by the PBOC and administered by NAFMII as the market’s SRO.
The National Development and Reform Commission (NDRC) sets regulations for and registers
the issuance of enterprise bonds as well as the issuance of debt securities abroad by enterprises,
while the State Administration of Foreign Exchange (SAFE) governs any applicable currency
quotas and the inflow and outflow of foreign exchange in the The China Banking and
Insurance Regulatory Commission (CBIRC) licenses and supervises the actions of banks and
insurance companies.
At the end of 2019, the outstanding balance in the CIBM (., debt financing instruments
deposited at CCDC and SHCH) represented approximately 86% of the total outstanding
balance of bonds and other debt financing instruments deposited at the three securities
depositories in the PRC: CCDC, SHCH, and the China Securities Depository and Clearing
Co., Ltd. (CSDC) for the exchange bond market (Figure ).
1 In principle, and for convenience in this bond market guide, bonds that need an application for registration with
NDRC for issuance are called enterprise bonds. Other company bonds are distinguished as corporate bonds. Both
corporate bonds and enterprise bonds are bonds issued based on the creditworthiness of the issuing companies
themselves. “Collective bonds” issued by local enterprises are included among enterprise bonds.
Figure : Bond Issuance in the PRC by Major Bond Market Segment
CCDC = China Central Depository & Clearing Co., Ltd.; CNY = Chinese renminbi; CSDC = China Securities Depository and Clearing
Co., Ltd; PRC = People’s Republic of China; SHCH = Shanghai Clearing House; SSE = Shanghai Stock Exchange; SZSE = Shenzhen
Stock Exchange.
Note: Statistics for SHCH do not include negotiable certificates of deposit.
Sources: CCDC, CSDC, SHCH, SSE, and SZSE.
2013 2014 2015 2016 2017 2018 2019
5,000
0
Inter-Bank Bond Market
(CCDC)
10,000
Inter-Bank Bond Market
(SHCH)
15,000
Exchange bond market
(SSE, CSDC)20,000
Exchange bond market
(SZSE, CSDC)
30,000
25,000
Figure : Bond Issuance in the PRC by Major Bond Market Segment—
including NCD deposited at SHCH
CCDC = China Central Depository & Clearing Co., Ltd.; CNY = Chinese renminbi; CSDC = China Securities Depository and Clearing
Co., Ltd; PRC = People’s Republic of China; SHCH = Shanghai Clearing House; SSE = Shanghai Stock Exchange; SZSE = Shenzhen
Stock Exchange.
Note: Statistics for SHCH include negotiable certificates of deposit (NCD).
Sources: CCDC, CSDC, SHCH, SSE, and SZSE.
2013 2014 2015 2016 2017 2018 2019
0
Exchange bond market
(SZSE, CSDC)
Exchange bond market
(SSE, CSDC)
Inter-Bank Bond Market
(SHCH) (NCD)
Inter-Bank Bond Market
(SHCH)
Inter-Bank Bond Market
(CCDC)
40,000
30,000
20,000
10,000
(CNY
billion)
50,000
1. Debt Financing Instrument Issuance in the Inter-Bank Bond Market
At the end of 2019, the issuance amount of debt financing instruments in the CIBM (settled
and deposited at CCDC and SHCH) represented approximately % of the total issuance of
bonds and notes settled and deposited at the three securities depositories in the PRC (Figure
). This proportion has decreased slightly in recent years; for example, the proportion was
% in 2018.
At the same time, if NCD issuances are included in the statistics, the combined
issuance numbers in the CIBM show a steady increase (Figure ).
Figure : Bond Issuance in the CIBM and Deposited with CCDC by Instrument Type
CCDC = China Central Depository & Clearing Co., Ltd; CIBM = China Inter-Bank Bond Market; CNY = Chinese renminbi; CP =
commercial paper; FI = financial institutions; MTN = medium-term notes.
Sources: CCDC Annual Review, 2013 (English). –14; CCDC Bond Market Statistical Analysis Report, 2014–2017; CCDC Annual
Report, 2016–2017, CCDC Bond Market Operation Analysis, 2017; CCDC 2018–2019/12 统计月报: 2-01 债券发行量(按券种).
2013 2014 2015 2016 2017 2018 2019
Government bonds0
Local government bonds2,000
Policy bank financial bonds4,000
Government-backed (agency) bonds
6,000
Commercial bank bonds and notes
8,000
Financial bonds (non-bank FI)
Tier 1 and 2 capital instrument (2019)
10,000
CP issued by securities companies12,000
Enterprise bonds and MTN (2013)
14,000
Asset-backed securities
(CNY
billion)
16,000
Today, debt financing instruments issued and traded in the CIBM cover a wide range of
instruments, including government bonds, local government bonds, policy bank financial
bonds (PFBs), government-backed (agency) bonds, central bank bills, enterprise bonds,
financial bonds (commercial bank bonds and notes, non-bank financial institution bonds), as
well as medium-term notes (MTN), commercial paper and SCP, PPN, and asset-backed notes
(ABN) and asset-backed securities (ABS).2 Panda bonds—debt financing instruments issued
by nonresident issuers—are also issued and traded in the CIBM. In addition, NCD represent
an important instrument issued and traded in the CIBM, while repurchase agreement (repo)
transactions are a common product type.
Given its size and the large variety of debt instruments in the CIBM, the market is serviced by
two entities acting as depository and settlement institutions: CCDC and SHCH. Debt financing
instruments deposited at CCDC in 2019 represented % of the total issuance volume in the
CIBM that year when NCD issuance is included, while the amount of new issuances deposited
with SHCH in 2019, including NCD, represented % of the total issuance volume in the
CIBM in 2019.
Figure gives an illustration of the proportion of the types of debt financing instruments
that were deposited with CCDC in recent years. Bond issuances in the CIBM being deposited
with CCDC largely consist of public sector bonds; in 2019, the proportion of public sector
bonds issued in the CIBM and deposited with CCDC was approximately %.
2 ABS do not constitute securities under the Securities Law.
Table provides further insight into the value of debt financing instruments issued in 2019
and deposited with CCDC by instrument type.
Table : Debt Financing Instruments Issued in the CIBM and Deposited with CCDC
in 2019
Instrument
2019 Total
Issuance Amount
(CNY billion) Share
Government bonds 4, %
Public
sector Local government bonds 4, %
bonds
Policy bank financial bonds 3, %
(%)
Government-backed (agency) bonds %
Commercial bank bonds and notes %
Tier 1 and Tier 2 capital instruments 1, %
Private
sector Financial bonds (by non-bank FI) %
bonds
Commercial paper issued by securities
companies %(%)
Enterprise bonds %
Asset-backed securities %
CCDC Total 15, %
CCDC = China Central Depository & Clearing Co., Ltd; CIBM = China Inter-Bank Bond Market; CNY =
Chinese renminbi; FI = financial institution.
Source: CCDC, 2019/12 统计月报: 2-01 债券发行量(按券种).
On the other hand, SHCH focuses more on private sector debt financing instruments such as
MTN, PPN, commercial paper, SCP, and green debt financing instruments (from 2016
onward) (Figure ).
SHCH also serves as the central depository for NCD traded in the CIBM, but in statistical
classifications they are typically treated or shown separately from bonds and other debt
financing instruments due to their banking product nature and short-term tenors. Please refer to
Chapter for a description of the basic characteristics of the NCD traded in the CIBM.
Figure : Debt Financing Instrument and NCD Issuance in the CIBM
CCDC = China Central Depository & Clearing Co., Ltd; CIBM = China Inter-Bank Bond Market; CNY = Chinese
renminbi; NCD = negotiable certificates of deposit; SHCH = Shanghai Clearing House.
Source: CCDC Annual Review, 2013 (English). –14; CCDC Bond Market Statistical Analysis Report, 2014–2017; CCDC
Annual Report, 2016–2017, CCDC Bond Market Operation Analysis, 2017; CCDC 2018–2019/12 统计月报: 2-01债券发行量(按券种
); SHCH 2013–2019/12 Monthly Report 统计月报 表二 上海清算所固定收益产品发行量.
CCDC (debt financing instruments) SHCH (debt financing instruments) Negotiable Certificates of Deposit (in SHCH)
2019201820172016201520142013
-
5,000
10,000
15,000
20,000
(CNY
billion)
25,000
To give an impression of the significance of the amount of NCD relative to other debt
financing instruments in the CIBM, issuance amounts from 2013 to 2019 are shown in Figure
.
CIBM = China Inter-Bank Bond Market, CNY = Chinese renminbi, SHCH = Shanghai Clearing House.
Notes: Figure does not include negotiable certificates of deposit. Other notes include project income notes (2014– 2017),
regional small and medium-sized enterprise collective notes (2013–2015), and standardized notes (2019).
Sources: SHCH 2013–2019/12 Monthly Report 统计月报 表二 上海清算所固定收益产品发行量.
2019201820172016201520142013
1,000
0
Commercial paper
2,000
Medium-term notes
Super short-term commercial paper
3,000
6,000
Asset-backed notes and asset-backed
securities
5,000 Government-backed (agency) bonds
Non-policy financial bonds and notes
4,000
Private placement notes
Other notes
Green debt financing instruments
7,000
Figure : Debt Financing Instrument Issuance in the CIBM and Deposited with
SHCH by Type
(CNY billion)
8,000
Figure : Cash Bond, NCD, Repo, and Bond Lending Volume in the PRC by Major
Bond Market Segment
CCDC = China Central Depository & Clearing Co., Ltd.; CNY = Chinese renminbi; CSDC = China Securities Depository and Clearing
Co., Ltd; NCD = negotiable certificates of deposit; PRC = People’s Republic of China; SHCH = Shanghai Clearing House; SSE =
Shanghai Stock Exchange; SZSE = Shenzhen Stock Exchange.
Note: Total trading volume includes new issues and transactions in money market instruments (NCD) at SHCH. Sources:
CCDC, CSDC, SHCH, SSE, and SZSE.
2013 2014 2015 2016 2017 2018 2019
400,000
200,000
0
Inter-Bank Bond Market
(CCDC)
600,000
Inter-Bank Bond Market
(SHCH)
800,000
Exchange bond market
(SSE)
1,000,000
Exchange bond market
(SZSE)
1,400,000
1,200,000
A further breakdown of individual debt financing instrument types issued in the CIBM can
be found in Chapter .
2. Debt Financing Instrument Trading in the Inter-Bank Bond Market
Debt financing instruments and NCD issued in the CIBM are traded on the platform operated
by CFETS (please see Chapter IV for more details). At the end of 2019, the total trading and
transaction volume in the CIBM reached approximately
CNY1,068 trillion and represented approximately % of the overall bond market
trading and transaction volume (Figure ).
3. Corporate Bonds and Enterprise Bonds
There are three types of nonfinancial corporate bonds in the PRC: (i) enterprise bonds (企业债
), (ii) corporate bonds (公司债), and (iii) debt financing instruments of nonfinancial enterprises
(非金融企业债务融资工具).
Originally, enterprise bonds (企业债) referred to the bonds issued by central government-
related agencies, state-owned enterprises (SOEs), or state-owned holding companies affiliated
with NDRC. NDRC is responsible for supervising the issuance of enterprise bonds. For
historical reasons, enterprise bonds have always been supervised by NDRC, being a
government agency overseeing SOE reform. With the progress of privatization, the delineation
between corporate bonds and enterprise bonds has become less strict. In general terms,
enterprise bonds are included in corporate bonds and often called corporate bonds.
Enterprise bonds are mainly issued by nonlisted SOEs or government-backed entities and are
issued in the CIBM or the exchange bond market, or in both markets. Most enterprise bonds
are fungible between the CIBM and exchange bond market. On the
other hand, corporate bonds are issued in the exchange bond market and listed on the
exchange(s).
In principle, and for convenience in this bond market guide, bonds that need an application for
registration with NDRC for issuance are called enterprise bonds; other company bonds are
distinguished as corporate bonds. Basically, both corporate bonds and enterprise bonds are
bonds issued based on the creditworthiness of the issuer companies themselves.
Please also see Chapter for a description of the types of bonds and notes issued in the
CIBM.
4. Formation of the Private Placement to Designated or Specialized
Institutional Investors Concept
On 29 April 2011, NAFMII issued the Rules for Private Placement of Debt Financing
Instruments of Non-Financial Enterprises in the Inter-Bank Bond Market (银行间债券市场非
金融企业债务融资工具非公开定向发行规则) (2011, No. 6). With these rules, NAFMII
introduced new concepts in private placement: “private placement (定向发行)” and
“designated institutional investor (特定机构投资人)” or, in short, “private placement investor (
定向投资人).”
These concepts are similar to (i) the placement to Qualified Investors (向合格投资者非公开发行
), and (ii) the concept of Qualified Institutional Investors (合格投资者中的机构投资者) in the
exchange bond market.
The 2011 Rules stipulated that the term “private placement (定向发行)” refers to the issuance
of debt financing instruments by nonfinancial enterprises with legal qualifications (.,
enterprises) to “designated institutional investors (特定机构投资人)” who are designated by the
issuer and the lead underwriter in the CIBM, also referred to as “private placement investors (
定向投资人),” and includes the transfer of such debt financing instruments within the scope of
designated institutional investors (DIIs) only.
The term private placement investors stems from the practice that an issuer and its appointed
underwriter had to specifically identify (., target), upon every issuance, a list of
institutional investors to which the debt financing instruments could be issued. Hence, debt
financing instruments issued via a private placement (非公开定向发行方式发行的债务融资工
具) are also known as “nonpublicly placed debt financing instruments (非公开定向债务融资工
具),” or simply “private placement instruments (定向工具).”
Private placement investors who invest in private placement instruments should issue a written
confirmation letter to NAFMII confirming that they are aware of the investment risk of the
private placement instruments, have the ability and willingness to assume the investment risk
of the private placement instruments, voluntarily accept the management of investors in the
CIBM by NAFMII, and fulfill membership obligations.
In addition to the abovementioned method of designating institutional investors, on 26
November 2015, to standardize the selection procedure of private placement
investors (定向投资人), NAFMII subsequently issued the Rules for the Registration and
Issuance of Debt Financing Instruments of Non-Financial Enterprises (非金融企业债务融资工具
注册发行规则) and the Provisions for the Selection of Specialized Institutional Investors of
Private Placement Notes (定向债务融资工具专项机构投资人遴选细则), including a formal
definition of “specialized institutional investors (专项机构投资人)” to be selected by NAFMII.
At the same time, NAFMII named 120 specialized institutional investors (SIIs) on the List of
Specialized Institutional Investors of Private Placement
Figure : Repo and Bond Lending Transaction Volume by Major Bond Market
Segment
CCDC = China Central Depository & Clearing Co., Ltd; CIBM = China Inter-Bank Bond Market; CNY = Chinese renminbi; CSDC
= China Securities Depository & Clearing Co., Ltd; SHCH = Shanghai Clearing House; SSE = Shanghai Stock Exchange; SZSE =
Shenzhen Stock Exchange.
Note: Bond lending only applies to CIBM.
Source: CCDC Bond Market Statistical Analysis Report, 2013–2017; SSE Fact Book 2016, 2017 (data for 2015, 2016); SSE website
(data for 2013, 2014, 2017); SZSE Fact Book, 2013–2017.
2013 2014 2015 2016 2017 2018 2019
0
200,000
Inter-Bank Bond Market
(CCDC-Repo)
400,000
Inter-Bank Bond Market
(CCDC-Bond Lending)
600,000
Inter-Bank Bond Market
(SHCH-Repo)
800,000
Exchange bond market
(CSDC, SZSE-Repo)
Exchange bond market
(CSDC, SSE-Repo)
1,000,000
1,200,000
Notes (定向债务融资工具专项机构投资人名单). Being on this positive list, SIIs need not
acknowledge their risk awareness and acceptance of market membership rules to NAFMII
for every issuance of a debt financing instrument they are interested to buy. By October
2019, this positive list contained about 180 investors.
As a result, an issuer may choose to offer its debt financing instruments in the CIBM through
a private placement to either institutional investors selected by NAFMII or institutional
investors who are designated by the issuer and the lead underwriter. The abovementioned
concepts also made possible the private placement of Panda bonds to designated or SIIs.
In April 2020, NAFMII announced the latest revisions to its rules on private placements.
While there were no changes to the investor concepts mentioned above, the latest rules
focused on the streamlining of the registration process and more efficient disclosure practices
and introduced a further categorization of issuer types with distinct disclosure obligations for
each category. The new rules became effective on 1 July 2020.
5. Repos and Bond Lending Transactions in the Inter-Bank Bond Market
Repo transactions play a significant role in trading in the CIBM. In 2019, repo transactions
in the CIBM represented % of the total market repo volume in the PRC. Due to the
intraday repo practices in the market, repo transaction volumes appear as very large
numbers (Figure ).
Repo transactions in the CIBM are supervised by the PBOC, while the participants are subject
to NAFMII membership and applicable regulations, as well as CFETS trading rules. Please see
Chapter for a comprehensive description of the repo market in the CIBM.
In addition, securities borrowing and lending transactions, which in market practice are
referred to as bond lending, may only be carried out in the CIBM. For details on bond lending
practices, please refer to Chapter .
C. Outline of the Investment Schemes to Open the Capital Market
Since the PRC’s accession to the World Trade Organization in 2001, the Government of the
PRC has established various concepts for the opening of the domestic bond and capital markets
in line with the needs of foreign investors and potential issuers.
Specifically, investors may invest in the PRC’s bond market, which is commonly referred to
as the “China bond market,” through any one of five concepts for which they may be
eligible (in their order of introduction): (i) Qualified Foreign Institutional Investor (QFII),
(ii) the Pilot Scheme for Three Types of Institutions (三类机构), (iii) Renminbi Qualified
Foreign Institutional Investor (RQFII), (iv) the CIBM Direct Scheme, and (v) Bond Connect.
In this context, QFII and RQFII are often mentioned together due to their similar eligibility
criteria, approval process, and origins in the exchange market.
Please see Table for a brief summary of each concept’s features. Chapter
contains a full description of the features of each of the market access concepts available
for investors in the CIBM.
The individual concepts introduced by the government served specific purposes in line with
the various stages of development of the bond market. While at its inception in 2002 as the
first foreign access method to the PRC capital market, QFII focused on the exchange market
and favored equities, other initiatives were established as part of the national policy of the
internationalization of the Chinese renminbi—such as the Pilot Scheme for Three Types of
Institutions and RQFII—to provide means of effective use of offshore Chinese renminbi (ISO
code: CNH) that accumulated outside of the PRC. In the earlier concepts, it had still been
necessary for each foreign institutional investor to be approved by the competent authorities
and to observe a quota.
The availability of foreign investment access methods was followed by opportunities for
nonresident issuers as well as by introducing the issuance of Panda bonds. From 2015, in
particular, further policy and regulatory measures to open the China bond market—as part of
the broader liberalization of the capital market—have shifted from a framework with inherent
limitations to a framework with a focus on enabling investment at the discretion of foreign
investors. From February 2016, nonresident financial institutions were able to invest in the
CIBM with only a notification to the PBOC. CIBM Direct, as it is now known, has emerged as
a highly flexible framework without a need for approval, an investment limit, or repatriation
restrictions. The most recent measure, Bond Connect, introduced in July 2017, takes a further
step toward the opening of the domestic bond market in the PRC, allowing nonresident
investors with established accounts in Hong Kong, China to access the CIBM with a
streamlined approval and onboarding process.
D. Market Opening Milestones in the China Inter-Bank Bond
Market since 2005
While the QFII system was introduced in 2002 and its pilot program officially launched in
May 2003, bonds that could be invested via QFII were initially limited to listed bonds in the
exchange bond market and not the bonds and notes issued and traded in the CIBM. It took
until late 2011 before QFII were able to place investments in bonds issued and traded in the
CIBM.
However, the initial opening of the CIBM to foreign investors and nonresident issuers began
in 2005. This section aims to recall the important milestones in the opening of the CIBM to
nonresident participants, including the more prominent developments related to QFII, RQFII,
CIBM Direct, Bond Connect, as well as Panda bond issuance.
1. Initial Opening to Foreign Investors and Nonresident Issuers, 2005–
2010
In February 2005, the PBOC, NDRC, and CSRC formulated the Interim Measures for the
Administration of CNY-Denominated Bond Issuances by International Development
Organizations (国际开发机构人民币债券发行管理暂行办法) (2005, No. 5), which laid the
foundation and was the first regulation for what was to become the Panda bond issuance
concept. In these interim measures, international development organizations refer to the
multilateral, bilateral, and regional international development financial institutions that grant
development loans and carry out investments.
In May 2005, with approval from the PBOC, the Pan-Asia Index Fund and China Bond Index
Fund of the Asian Bond Fund II were given direct, if limited, access to the CIBM, thus
becoming the first foreign entities approved to invest in debt financing instruments in the
CIBM.
In August 2010, by issuing the Notice of the PBOC on Issues Concerning the Pilot Program on
Investment in the Inter-Bank Bond Market with Renminbi Funds by Three Types of Institution
Including Overseas RMB Clearing Banks (中国人民银行关于境外人民币清算行等三类机构运用
人民币投资银行间债券市场试点有关事宜的通知) (2010, No. 217), the PBOC launched a pilot
scheme allowing certain institutions to trade and settle bonds in the The three types of
institution (三类机构) were (i) foreign central banks or monetary authorities; (ii) CNH
settlement banks in Hong Kong, China, and Macau, China; and (iii) cross-border CNH
settlement participating banks in Hong Kong, China and Macau, China. This pilot scheme
represented the first CNY-denominated investment concept using offshore Chinese renminbi
(CNH) as the source of funds. An investment limit was set as within the range of CNH
holdings by each financial institution (., institutions were allowed to use available CNH
balances resulting from normal business activities).
In September 2010, to further standardize the behavior of international development institutions
when issuing CNY-denominated bonds, the PBOC, MOF, NDRC, and CSRC jointly issued
amendments to the earlier (Panda bond) regulations in the form of the Interim Measures for the
Administration of CNY-Denominated Bond Issuances by International Development
Institutions (国际开发机构人民币债券发行管理暂行办法) (2010, No. 10), which deregulated the
outward remittance of Chinese renminbi proceeds from Panda bond issuance by such
international development
3 See
4 See
2. Liberalization of the Qualified Foreign Institutional Investor and Renminbi
Qualified Foreign Institutional Investor Schemes, 2011–2013
The QFII scheme was introduced in 2002 to allow foreign investors direct access to the
domestic securities market for the first time. However, the investment opportunities did not
include instruments issued and traded in the CIBM; instead, the focus was on the exchange
(bond) market.
On 16 December 2011, the RQFII scheme was introduced, which allowed the use of offshore
renminbi (CNH) raised by the subsidiaries of Chinese domestic fund management companies
and securities companies in Hong Kong, China to invest in the domestic securities market,
including in the CIBM, for the first time. The underlying regulation was officially called Pilot
Measures for Domestic Securities Investment by RQFIIs (Fund Management Companies and
Securities Companies) (人民币合格境外机构投资者境内证券投资试点办法) (2011-12-16, CSRC
Order No. 76). It was jointly issued by CSRC, the PBOC, and SAFE. Under the new pilot
scheme, the PBOC allowed RQFII to access the CIBM, if limited to investments in cash bonds
only, in addition to bonds in the exchange bond market under CSRC regulations similar to
QFII. The RQFII scheme included CNY-denominated investment quotas for a country or
region, which were to be granted by SAFE.
Hong Kong, China, being the test pilot region of the scheme, also referred to as the PBOC’s
pilot CIBM scheme, obtained the first such quota at CNY20 billion. In the first batch, 21
subsidiaries of Chinese fund management and securities companies based in Hong Kong,
China were granted RQFII status and a quota to invest in the CIBM via a domestic bond
settlement agent (see also Chapter for a description of the function of a bond settlement
agent).
In 2012, the PBOC pilot CIBM scheme was extended to insurance companies domiciled in
Hong Kong, China; Singapore; and Taipei,China. From 2012 onward, QFII investment in
bonds issued and traded in the CIBM was permitted in addition to the exchange bond
market.
Effective 1 March 2013, the original RQFII pilot measures were replaced by the 2013 Pilot
Measures for Domestic Securities Investment by RQFIIs (人民币合格境外机构投资者境内证券
投资试点办法) (2013-03-01, CSRC Order No. 90), jointly released by CSRC, the PBOC, and
SAFE, which expanded the scope of the scheme and relaxed earlier investment restrictions
such as asset allocation percentages. Through the revised measures, QFIIs were permitted,
subject to PBOC approval, to invest in the CIBM within an approved quota. Subsequently, all
RQFIIs across jurisdictions were also allowed to invest in the CIBM, subject to PBOC
approval.
To aid the implementation of the revised scheme, CSRC issued the Measures for the RQFII
Pilot Program (Decree No. 90) on 6 March 2013, which regulated the securities investment
activities of RQFIIs in the PRC. According to the measures, to make securities investments in
the PRC, an RQFII needed to entrust a domestic commercial bank with asset custody and a
domestic securities company with securities trading on behalf of the RQFII.
On 11 March 2013, SAFE released its Circular on Issues Concerning the Pilot Program of
Investment in Domestic Securities by RQFII. On 2 May 2013, the PBOC announced the
revised Circular on Issues Concerning the Implementation of Pilot Measures for RQFIIs,
which revised the requirements on account opening, account management, and asset
allocation for the RQFII scheme, and officially allowed all RQFII to access the CIBM.
3. Further Liberalization of the Qualified Foreign Institutional Investor and
Renminbi Qualified Foreign Institutional Investor Schemes, 2016–2019
Since 2016, the QFII and RQFII schemes have evolved significantly in terms of market
accessibility, asset allocation, and capital mobility.
On 5 September 2016, SAFE’s RQFII rules were further relaxed regarding the quota
application and controls, including simplifying the quota application process, easing inward
and outward remittances, and shortening the original lockup period. On
23 September 2016, CSRC announced the removal of all asset allocation restrictions. Instead,
QFIIs and RQFIIs were allowed to decide asset allocation at their discretion, other than
allocating a substantial percentage of assets to cash and cash equivalent products.
At the 2018 Boao Forum for Asia in April 2018, President Xi Jinping announced a “new phase
of opening” of the PRC’s economy, including liberalizing the financial system and making the
PRC more attractive for foreign investments. The following day, Yi Gang, Governor of the
PBOC, outlined the implementation measures and timeline in greater detail. Following the
speeches, regulators issued a series of implementing rules and policy statements.
On 12 June 2018, the PBOC issued the Regulations on Foreign Exchange Administration for
Domestic Securities Investment by QFII and SAFE issued the Circular on the Administration
for Domestic Securities Investment by RQFII to further ease restrictions on foreign
institutional investors’ access to the domestic financial market. Under the new regulations,
the quarterly cap of 20% of total domestic assets that a QFII may remit out of the country
was removed. A 3-month lockup period for redeeming investment principal was also
removed for both QFIIs and RQFIIs. To facilitate the management of foreign exchange risks
related to the securities investment of QFIIs and RQFIIs, investors were allowed to place
foreign exchange hedges on their domestic investments.
At the end of July 2018, the total QFII investment quota granted to 287 license holders had
reached billion. At the end of September 2018, the total RQFII investment quota
had reached CNY1,940 billion, as granted across 20 countries and regions, and the actual
investment amount used under the quota reached
CNY640 billion across 203 entities.
In January 2019, SAFE doubled the investment quota available to QFII from USD150 billion
to USD300 billion, and on 10 September 2019, SAFE announced that
it had abolished the quota system for both the QFII and RQFII schemes to promote the further
opening of the PRC’s financial markets.
4. Introduction of the CIBM Direct Scheme, 2015–2018
In July 2015, the PBOC released a notice allowing foreign central banks or monetary
authorities, sovereign wealth funds, and other international financial organizations (as well as
RMB clearing banks in Hong Kong, China, and Macau, China) to directly invest in the CIBM
without approval requirements and quota limits. Institutions in these categories were permitted
to invest through an onshore bond settlement agent, subject to a filing with the PBOC. This
marked a significant shift in the process of opening the PRC’s capital market, making it much
easier for international institutional investors to access the CIBM and paving the way for
further liberalization of cross-border investments in the China bond market. The new scheme
was called CIBM Direct and introduced the term “Qualified Overseas Institutional Investor,” or
QOII, to describe its constituents.
CIBM Direct was launched with the promulgation of PBOC Public Notice No. 3 on 17
February 2016, under which the definition of QOII was also widened to include additional
foreign institutional participants, including commercial banks, insurance companies,
securities firms, fund and asset management companies, as well as pension and endowment
funds; the activities of QFIIs and RQFIIs in the CIBM have since been regulated under the
designation QOII.
Further to the above notice, in May 2016, the PBOC Shanghai and SAFE published the
Foreign Institutional Investor Rules, implementing the actual opening up of the CIBM. The
implementing rules rolled out a “registration” approach to all types of foreign investors and
removed quota limitations; foreign investors may remit Chinese renminbi or foreign currency
for CIBM investments, and the foreign exchange may be made onshore or offshore, without an
approval from SAFE. The bond settlement agent may also provide custodian services in the
CIBM. New instruments were also made available for hedging purposes—such as bond
lending, bond forwards, and forward rate agreements—subject to the completion of the
prescribed legal documentation.
Under the CIBM Direct Scheme, QOIIs may also trade bonds directly through banks holding
a Type A license, which is defined as a participant who can trade, settle, and provide custody
for CIBM instruments both for themselves and on behalf of Type C investors, who must
appoint a Type A investor for settlement to carry out bond trading on their behalf. Type B
license holders may trade and settle in the CIBM for themselves only, or trade directly with
others.
5. Further Easing of Panda Bond Regulations, 2014–2019
In March 2014, Daimler AG, the German carmaker and nonfinancial enterprise, issued the first
corporate Panda bond in the CIBM, as PPN with a maturity of 1 year.
In September 2015, the PBOC eased restrictions on issuers of Panda bonds, permitting
that proceeds raised from the issuance of Panda bonds could be used within or outside
the PRC.
On 8 September 2018, the PBOC and MOF jointly issued the Interim Measures for the
Administration on Bonds Issued by Overseas Issuers on the National Inter-Bank Bond Market
(全国银行间债券市场境外机构债券发行管理暂行办法) (PBOC and MOF Notice 2018, ) to
further clarify the qualifications and registration procedures for foreign institutions to issue
Panda bonds in the CIBM using two methods of issuance:
(i) public offering and (ii) private placement to DIIs or SIIs, which are also known as private
placement investors (see Chapter for a description of these institutional investor types).5
The interim measures laid out basic provisions on information disclosure, issuance registration,
custody, and settlement, as well as Chinese renminbi account opening, foreign exchange, and
investor protection.
On 17 January 2019, pursuant to these interim measures, NAFMII published the Guidelines
on Debt Financing Instruments of Overseas Non-Financial Enterprises (for Trial
Implementation) (境外非金融企业债务融资工具业务指引(试行)), which provided more detail on
the registration for issuance process and information disclosure for Panda
5 For the Chinese version (PDF), see For the
English version, see
6 For the Chinese version, see For the English version,
see html.
6. Debut of Bond Connect, 2017–2018
The latest scheme to open the China bond market to be introduced, Bond Connect, is a new
mutual market access scheme that will eventually allow investors from the PRC and overseas
to trade in each other's bond markets through connections between the respective financial
infrastructure institutions in the PRC and Hong Kong, China.
“Northbound Trading” commenced on 3 July 2017, allowing foreign investors from Hong
Kong, China and other regions to invest in the CIBM through mutual access arrangements with
respect to trading, custody, and settlement. Proposed “Southbound Trading,” under which
investors from the PRC can access the Hong Kong bond market, is not expected to be realized
anytime soon.
In addition to the QFII and RQFII schemes, Bond Connect (债券通) provides a new avenue for
foreign investors to access the China bond market, particularly the CIBM. The scope of eligible
foreign investors under Bond Connect is the same as for the CIBM Direct scheme, being
QOIIs. Please see Chapter for more details on Bond Connect.
To establish an interconnection mechanism between the domestic bond markets in the PRC and
Hong Kong, China through Bond Connect, the PBOC issued the Interim Measures for the
Administration of Mutual Bond Market Access between Mainland China and Hong Kong SAR
(内地与香港债券市场互联互通合作管理暂行办法) (中国人民銀行令 [2017] 第1 号／同日施行) on
21 June 2017.
On 3 July 2017, the state-owned Agricultural Development Bank of China issued CNY16
billion worth of financial bonds in the CIBM, of which CNY1 billion was allocated to foreign
investors through Bond Connect. On 26 July 2017, Hungary issued a CNY1 billion 3-year
Panda bond in the CIBM, representing the first foreign sovereign CNY-denominated bond
allocated to investors via book-building through Bond Connect. Since then, nonfinancial
corporate debt financing instruments, Panda bonds, foreign sovereign government bonds
denominated in Chinese renminbi, ABS, and other bonds have also been issued through Bond
Connect. Since April 2019, even NCD have been issued to foreign investors via Bond Connect.
Legal and Regulatory Framework
A. Legal Tradition
The legal structure of the PRC follows the socialist legal system with Chinese characteristics
guided by the Constitution of the PRC. The current version of the constitution was adopted
in 1982, with further revisions in 1988, 1993, 1999, and 2004. The constitution was last
amended on 11 March 2018. The legal framework is expressed through the Civil Law,
commercial laws, and other laws.
B. English Translation
Laws and regulations in the PRC are generally published in Chinese, the official national
language. Official publications use the simplified Chinese character set. Simplified Chinese
characters, known as jiǍnhuàzì (简化字), are standardized Chinese characters prescribed in the
Table of General Standard Chinese Characters for use in the PRC. Along with traditional
Chinese characters, they are one of the two standard character sets of the contemporary
Chinese written language. The Government of the PRC has promoted them for use in printing
since the 1950s to encourage literacy.
They are officially used in the PRC and Singapore.
In addition, the State Council, relevant ministries, stock exchanges, SROs, and market
institutions may provide official or unofficial English translations of the laws, regulations, and
directives for which they are responsible. For example, NAFMII carries on its website a
selection of the relevant laws and regulations for the CIBM and selected self-regulatory rules
and guidelines in CFETS also carries on its website a selection of relevant
regulations, market rules, and guidelines for the CIBM in
Some market institutions provide unofficial English translations of the laws, regulations,
and directives under their own purview. These English translations are typically available
from an institution’s websites, market observers, or the law departments of
The English version of the PBOC website contains a list of selected laws and regulations
related to the CIBM and other market segments, which are available for
8 See or
9 CFETS rules and regulations related to nonresident issuers and investors can be found at
10 As an example of a regulatory institution’s website, SHCH posts rules and regulations with relevance for
nonresident issuers and investors on its English language website. See
For an example of a university law
department’s website, see the Peking University Center for Legal Information (北大英华科技有限公司)
viewing or Laws and regulations on securities and derivatives—including state
laws, administrative laws, judicial interpretations, State Council department rules, and the rules
of SROs—are available from the CSRC website, if only in CSRC has an English
website. Hence, some English translations of laws and regulations, in particular those
pertaining to the QFII and RQFII regimes, may be available from this site. At the same time,
the CSRC website does not contain rules and regulations related to the CIBM. Otherwise,
English translations of laws and regulations may be available from other official or private
institutions.
While there may be no specific mention on these websites, only the versions of laws,
regulations, and other regulatory instruments issued in Chinese are relied upon for matters
before the courts. At the same time, translations of laws, regulations, and rules may result in
the use of different terminology in English from what was intended in the original Chinese
version. This has been observed, particularly when it comes to the description of rules and
regulations. As a result, this bond market guide also includes the title of institutions and major
laws and regulations in Chinese characters to aid the reader in ensuring that the correct
description of the institutions, laws, or regulations in question is provided.
Please also refer to Chapter for additional information on this topic in the context of
debt financing instrument issuance documentation and Appendix 5 for a list of Chinese
technical terms and their interpretations in English.
C. Legislative Structure
The legal framework of the China bond market consists of laws, administrative regulations,
department rules, business rules, and business agreements (Table ). This structure applies
to all bond market segments, including the Inter-Bank Bond Market.
Key legislation is the summary term for those laws aimed at a particular market such as the
securities market or capital market. These laws establish and govern securities markets or
market segments, including the bond market, its institutions, members, and participants. Laws
are prepared by the National People’s Congress (NPC) or its Standing Committee; the laws on
the bond market regulate and ensure the effective operation of the market.
Administrative regulations are issued by the State Council and contain market management
rules. Administrative rules also include local rules promulgated by local governments, as may
be applicable, and cover administrative measures on products, market participants, and other
market features.
Departmental rules are categorized as administrative rules and promulgated by the ministries
and commissions under the State Council, PBOC, and other departments with administrative
responsibilities directly under the State Council, including the bond market regulator(s).
Self-regulatory rules are set by SROs such as NAFMII. Industry provisions and business rules
are issued by bond market infrastructure or market institutions such as CCDC, CFETS, and
SHCH.
Business agreements are the service agreements signed by and between the bond market
infrastructure institutions and their customers or account holders.
11 See
12 CSRC. Laws and Regulations.
Table : Bond Market Legislative Structure in the People’s Republic of China
Legislative Structure
First tier Constitution
Second tier Laws (prepared by the NPC or the NPC Standing Committee, with supreme legal force)
Third tier Administrative regulations (issued by the State Council);Local rules, local opinions (promulgated by local governments)
Fourth tier Departmental rules (prepared by departments of the State Council, inclusive of bond market supervisory organization[s])
Fifth tier
Self-regulatory rules, industry provisions, business rules, and guidelines (issued by
NAFMII and bond market infrastructure institutions such as CCDC and SHCH)
Sixth tier Business agreements (service agreements signed by and between the bond market infrastructure institutions and customers)
CCDC = China Central Depository & Clearing Co., Ltd.; NAFMII = National Association of Financial Market
Institutional Investors; NPC = National People’s Congress; SHCH = Shanghai Clearing House.
Source: ASEAN+3 Bond Market Forum Sub-Forum 1 team based on CCDC. 2016. China Bond Market
Overview 2015. Beijing.
In practice, market laws and regulations are the general terms used when referring to laws,
administrative regulations, and department rules. Table provides significant examples in
each of the respective legislative tiers.
Table : Examples of China Inter-Bank Bond Market Legislation by Legislative Tier
Legislative Tier Content or Significant Examples
Constitution of the
People’s Republic
of China
Principles, Rights, and Obligations
Laws
(key legislation)
Law of the People's Republic of China on the People’s Bank of China, 2003
Law of the People’s Republic of China on Banking and Supervision, 2004
Law of the People’s Republic of China on Funds for Investment in
Securities, 2009
Company Law of the People's Republic of China, 2013
Securities Law of the People's Republic of China, 2014
Administrative
regulations
Administrative Measures for Debt Financing Instruments of Non- Financial
Enterprises in the Inter-Bank Bond Market, 2008, PBOC (银行间债券市
场非金融企业债务融资工具管理办法)
Administrative Measures for the Registration, Depository and Settlement of
Bonds in the Inter-Bank Bond Market, 2009, No. 1 PBOC (银行间债券市场债
券登记托管结算管理办法)
Regulations on the Administration of Enterprise Bonds, 2011 Revision
continued on next page
Table continued
Interim Regulation on Enterprise Information Disclosure, 2014
Guidelines for Book Building in Issuance of Enterprise Bonds (Interim), 2014
Interim Measures for Administration of the Bond Issuance by Overseas
Institutions in the National Inter-Bank Bond Market (全国银行间债券市场境外
机构债券发行管理暂行办法) (PBOC and MOF Notice 2018, )
Departmental rules Administrative Measures for the Cross-Market Transfer of Government
Bonds, 2003
Regulation of the People's Republic of China on Foreign Exchange
Administration, 2008 Revision
Regulation on Treasury Bonds of the People’s Republic of China, 2011
Administrative Measures for the Issuance and Transactions of
Corporate Bonds, 2015
Interim Measures for the Administration of Mutual Bond Market Access
between Mainland China and Hong Kong SAR, 2017, No. 1 (内地与香港债券
市场互联互通合作管理暂行办法)
Self-regulatory
rules, industry
provisions, business
rules and guidelines
Rules for the Registration and Issuance of Debt Financing Instruments of
Non-Financial Enterprises
(非金融企业债务融资工具注册发行规则2016版), 19 February 2016
Rules for Information Disclosure on Debt Financing Instruments of Non-
Financial Enterprises in the Inter-Bank Bond Market
(银行间债券市场非金融企业债务融资工具信息披露规则), 8 December 2017
Rules and Procedures for the Registration of Debt Financing
Instruments of Non-Financial Enterprises for Private Placement, (非金
融企业债务融资工具定向发行注册工作规程) 29 August 2017
Provisions for the Selection of Specialized Institutional Investors of
Private Placement Notes
(定向债务融资工具专项机构投资人遴选细则(2018版)) and the List of the
Specialized Institutional Investors of Private Placement Notes (2018年度定向
债务融资工具专项机构投资人名单), 14 December 2018
Model Investor Protection Clauses 2019
(投资人保护条款示范文本(2019版)的公告), 10 April 2019
Guidelines on Debt Financing Instruments of Overseas Non-Financial
Enterprises (for Trial Implementation)
(境外非金融企业债务融资工具业务指引(试行)), 17 January 2019
Guidelines for Default and Risk Disposal on Debt Financing Instruments
of Non-Financial Enterprises in the Inter-Bank Bond Market (银行间债券
市场非金融企业债务融资工具违约及风险处置指南), 27 December 2019
Meeting Rules and Procedures for Holders of Debt Financing
Instruments of Non-Financial Enterprises in the Inter-Bank Bond
Market (2019 Revision) (银行间债券市场非金融企业债务融资工具持有人会议
规程) (修订稿), 27 December 2019
Guidelines for Bond Trustee Business of Non-Financial Enterprise Debt
Financing Instruments in the Inter-Bank Bond Market (for Trial
Implementation) (银行间债券市场非金融企业债务融资工具受托管理人业务指
引(试行)), 27 December 2019
Rules and Procedures for the Registration of Debt Financing Instruments of
Non-Financial Enterprises for Public Offering (非金融企业债务融资工具公开发
行注册工作规程2020版), effective 1 July 2020
MOF = Ministry of Finance, NAFMII = National Association of Financial Market Institutional Investors, OTC = over-
the-counter, PBOC = People’s Bank of China, SAR = Special Administrative Region.
Notes: is a website for English-language resources on Chinese law created and maintained
by Chinalawinfo Co., Ltd. and the Legal Information Center of Peking University. Chinalawinfo Co., Ltd. is a legal
information and education company established by Peking University through its Legal Information Center. For
details, see
Sources: ABMF SF1 and information on laws and regulations from and the NAFMII
website.
D. Inter-Bank Bond Market Regulatory Structure
The CIBM is overseen by the PBOC (as the overall regulatory authority) and administered by
NAFMII (as the SRO for the CIBM) under the guidance of the PBOC. The two depositories
for the CIBM—the CCDC and the SHCH—issue self-regulatory rules and business rules for
its account holders and constituents that are binding.
It is notable that the scale and style of regulation differs between the CIBM and the exchange
bond market. Both markets have historically adopted different approaches for setting
regulations. For example, in the CIBM, under the mandate and supervision of the PBOC,
NAFMII administers much of the market and its participants.
Table gives an overview of the supervisory institutions with relevance for the CIBM.
Table shows the relation between specific debt instrument types, their issuer
categories, and each supervisory institution.
Table : Supervisory Institutions and Instruments under Their Remit
Institution Subjects
PBOC Overall supervision for the CIBM, policy bank financial bonds, Panda bonds (issued in the CIBM)
NDRC Issuances of enterprise bonds and railway bonds
CBIRC Financial bonds and credit asset-backed securities issued by banking institutions, financial bonds issued by insurance institutions
CSRC
Exchange bond market, National Equities Exchange and Quotations (new Third
Board); securities company short-term notes, corporate bonds, convertible bonds,
detachable convertible bonds, enterprise asset-backed securities, Panda bonds
(issued in the exchange bond market)
SAFE Panda bonds, QFII and RQFII quotas (until September 2019)
CBIRC = China Banking and Insurance Regulatory Commission, CIBM = China Inter-Bank Bond Market, CSRC
= China Securities Regulatory Commission, NDRC = National Development and Reform Commission, PBOC =
People’s Bank of China, QFII = Qualified Foreign Institutional Investor, RQFII = Renminbi Qualified Foreign
Institutional Investor, SAFE = State Administration of Foreign Exchange.
Source: ASEAN+3 Bond Market Forum Sub-Forum 1 team compilation based on China Depository &
Clearing Co., Ltd. 2016. China Bond Market Overview 2015. Beijing.
Table : Bond Types, Issuer Categories, and Related Supervisory Institutions
Bond Type Issuer Category Institution(s)
Commercial paper of
securities companies Securities companies
CSRC, SAC, NAFMII (for
registration)
Debt financing
instruments
Medium-term notes, commercial paper,
short-term commercial paper, private
placement notes, SME
collective notes, asset-backed notes
PBOC, NAFMII (for
registration)
Enterprise bonds Enterprises NDRC, NAFMII (forregistration)
Commercial banks, insurance
institutions, non-bank financial
institutionsFinancial bonds
Asset management companies
CBIRC, PBOC, NAFMII
(for registration)
Panda bonds Foreign financial institutions, foreign nonfinancial enterprises
MOF, PBOC, SAFE,
NAFMII (for registration)
Policy bank financial
bondsa Policy banks
PBOC, NAFMII (for
registration)
CBIRC = China Banking and Insurance Regulatory Commission, CSRC = China Securities Regulatory Commission,
MOF = Ministry of Finance, NAFMII = National Association of Financial Market Institutional Investors, NDRC =
National Development and Reform Commission, PBOC = People’s Bank of China, SAC
= Securities Association of China, SAFE = State Administration of Foreign Exchange, SME = small and
medium-sized enterprises.
a Policy bank financial bonds may be subsumed in the overall category of financial bonds in statistical and other
official publications. Financial bonds are defined as bonds issued by regulated financial institutions (policy banks,
commercial banks, insurance institutions, and non-bank financial institutions). However, while policy bank financial
bonds are issued both in the Inter-Bank Bond Market and the exchange bond market, other financial bonds, such as
those issued by commercial banks and insurance institutions, are only issued in the Inter-Bank Bond Market.
Notes: Table entries relate to the Inter-Bank Bond Market only. Bond types are presented in alphabetical order.
Source: ASEAN+3 Bond Market Forum Sub-Forum 1 team compilation based on Association of Corporate Counsel.
2017. Capital Markets Global Guide 2016/2017: Debt Capital Markets in China—Regulatory Overview. Beijing.
1. Ministry of Finance (中华人民共和国财政部)
The MOF handles fiscal policy, economic regulations, and government expenditure for the
state, formulating and implementing policies, rules, and regulations on managing the
government’s domestic debts and governing treasury bond issuance. The MOF also formulates
policies, rules, and regulations on managing the government’s external debts. Together with the
PBOC, the MOF released the Interim Measures for the Administration on Bonds Issued by
Overseas Issuers on the National Inter-Bank Bond Market in September 2018, which regulate
the issuance of Panda bonds in the PRC.
As part of its remit to formulate and supervise accounting regulations, the MOF also
supervises the accounting firms that help prepare and audit the financial statements of issuers
of debt financing instruments in the CIBM.
At the time of compilation of this bond market guide, the website of the MOF was only
available in Chinese.
2. People’s Bank of China (中国人民银行)
The PBOC was established on 1 December 1948 through the consolidation of Huabei Bank,
Beihai Bank, and Xibei Farmer Bank. In September 1983, the State Council decided to allow
the PBOC to function as a central bank. The Law of the People's Republic of China on the
People's Bank of China, adopted on 18 March 1995 and amended from time to time, has since
legally confirmed the PBOC's central bank
The amended Law of the People's Republic of China on the People's Bank of China, adopted
on 27 December 2003, provides that the PBOC perform the following major functions:
i. drafting and enforcing relevant laws, rules, and regulations that are related to
fulfilling its functions;
ii. formulating and implementing monetary policy in accordance with the law;
iii. issuing the renminbi and administering its circulation;
iv. regulating financial markets, including the inter-bank lending market, CIBM,
foreign exchange market, and gold market;
v. preventing and mitigating systemic financial risks to safeguard financial
stability;
vi. maintaining the renminbi exchange rate at an adaptive and equilibrium level, and
holding and managing the state foreign exchange and gold reserves;
vii. managing the state treasury as fiscal agent;
viii. making payment and settlement rules in collaboration with relevant departments
and ensuring normal operation of the payment and settlement systems;
ix. providing guidance to anti-money-laundering work in the financial sector and
monitoring money-laundering-related suspicious fund movement;
x. developing a statistical system for the financial industry and being responsible for the
consolidation of financial statistics as well as the conduct of economic analysis and
forecasts;
xi. administering credit reporting industry in the PRC and promoting the building up of
a credit information system;
xii. participating in international financial activities in the capacity of the central
bank;
xiii. engaging in financial business operations in line with relevant rules; and
xiv. performing other functions prescribed by the State Council.
In the context of the China bond market, the PBOC regulates and supervises the CIBM and
its constituents, and it approves Panda bond issuances by nonresident financial institutions
in the CIBM and domestic bond issuances by policy banks. The PBOC appoints and
supervises bond settlement agents and market makers. The PBOC’s open market operation
is also carried out using CIBM infrastructure and practices.
For a list of the significant measures issued by the PBOC and other rules and
regulations with direct relevance for the CIBM, please refer to Appendix 3.
13 The Law of the People's Republic of China on the People's Bank of China (中華人民共和國中國人民銀行法).
3. China Banking and Insurance Regulatory Commission (中国
银行保险监督管理委员会)
CBIRC is responsible for the licensing and supervision of the activities of banks and
insurance companies, and their issuance of financial bonds and ABS.
CBIRC was officially unveiled on 8 April 2018 as a new regulatory authority, combining the
functions of the then China Banking Regulatory Commission (CBRC) and the then China
Insurance Regulatory Commission (CIRC).
The main responsibilities of CBIRC are to
i. regulate and supervise the banking and insurance sectors in the PRC in accordance
with laws and regulations; ensure the legal and stable operation of banking and
insurance institutions;
ii. conduct systematic research on reform and opening up as well as on supervisory
effectiveness of the banking and insurance sectors; engage in strategic planning for
financial reform and development, the drafting of laws and regulations of the
banking and insurance sectors, and the establishment of a prudential regulation
framework and a financial consumer protection framework; formulate relevant rules
and regulations for the banking and insurance sectors, and make recommendations
for the formulation and amendment of these rules and regulations;
iii. formulate supervisory rules for prudential regulation and financial consumer
protection in accordance with the framework of prudential regulation and financial
consumer protection; develop operational rules and supervisory rules for microfinance
companies, financing guarantee companies, pawnshops, leasing companies,
commercial factoring companies, local asset management companies, and other
institutions; and establish a supervisory framework for the business activities of
online lending institutions;
iv. license banking and insurance institutions and their business scope in accordance with
laws and regulations; review and approve the qualification of senior management of
relevant institutions; and formulate codes of conduct for banking and insurance
employees;
v. conduct supervision on banking and insurance institutions in terms of corporate
governance, risk management, internal control, capital adequacy, solvency,
business operation, and information disclosure;
vi. conduct on-site examination and off-site surveillance on banking and insurance
institutions, carry out risk and compliance assessment, protect the legitimate rights
of financial consumers, and penalize illegal acts and misconducts;
vii. compile and publish statistical reports on the banking and insurance sectors, make
due disclosure in accordance with requirements and perform the duty of financial
statistical work;
viii. establish risk monitoring, control, assessment, and early warning mechanisms for the
banking and insurance sectors; track, analyze, monitor, and forecast the banking and
insurance operations;
ix. make recommendations for and oversee the implementation of the contingent risk
resolution plans of depository financial institutions and insurance institutions;
x. crack down on illegal financial activities in accordance with laws and regulations,
including identifying, punishing, and banning illegal fundraising activities and
conducting relevant coordination work;
xi. provide guidance for and monitor the work of local financial regulatory
authorities;
xii. engage in the activities of international banking and insurance organizations, including
the international regulatory standard-setting work for the banking and
insurance sectors; facilitate international cooperation in the banking and
insurance sectors;
xiii. carry out the routine administrative work of the supervisory boards of major
banks; and
xiv. perform other responsibilities assigned by the central government.
In the context of the CIBM, CBIRC licenses commercial banks and some non-bank financial
institutions (such as finance companies) that participate in the CIBM, and it approves the
issuance of debt financing instruments of commercial banks in the CIBM and the exchange
bond market, pursuant to the Law of the People’s Republic of China on Commercial Banks,
2015, which is also known as the Commercial Banks Law.
More information on the role and functions of CBIRC following the merger are
available on its
4. China Securities Regulatory Commission (中国证券监督管理委员会)
CSRC was established in 1992 to administer the operation of the exchange market and to
protect investors’ rights and interests in the exchange market, including in the exchange bond
market. CSRC is a ministerial-level public institution directly under the State Council. It
performs a unified regulatory function, according to the relevant laws and regulations, and
with the authority granted by the State Council over the securities and futures market of the
PRC and some of its constituents across market segments, it maintains an orderly securities
and futures market order, and ensures the legal operation of the capital market.
While CSRC is the key regulatory authority for the exchange bond market, it also fulfills some
regulatory functions with regard to the CIBM. In this context, CSRC is responsible for the
issuance of commercial paper and ABS by securities companies in the CIBM, as well as the
issuance of corporate bonds.
At the same time, CSRC is responsible for the regulations underlying the QFII and RQFII
market access schemes and, together with the PBOC, governs their eligibility for and
activities in the CIBM.
5. National Association of Financial Market Institutional Investors (中国
银行间市场交易商协会)
NAFMII acts as the SRO for the CIBM under the supervision and guidance of the PBOC.
NAFMII issues self-regulatory rules for its members and constituents in the CIBM and their
conduct, including regulatory processes on the registration (注册) and issuance of debt
financing instruments.
NAFMII was founded on 3 September 2007, based on the approval of the State Council.
NAFMII aims to support and drive the development of the OTC financial market in the PRC,
which is composed of the CIBM, interbank lending market, foreign exchange market,
commercial paper and SCP market, and gold market.
The mandate for NAFMII as an SRO includes the following responsibilities:
i. formulate self-regulatory rules, business standards, and professional ethics, and
supervise their implementation;
ii. admit and administer the licenses of lead underwriters, underwriters, and credit
rating agencies (CRAs) in the CIBM;
14 See
iii. protect the legitimate rights and interests of NAFMII members and represent them
to raise concerns, proposals, and requests they encounter during their business
operations to related authorities and legislatures;
iv. educate members and enhance their awareness to obey relevant state laws and
regulations as well as guidelines, norms, and rules promulgated by NAFMII;
supervise and examine member’s practices and penalize those who violate the
NAFMII constitution and self-regulatory rules in a bid to maintain market order;
v. mediate disputes between NAFMII members and customers;
vi. organize continuing education and business training programs for practitioners to
improve their business skills and vocational capabilities;
vii. organize research and exchanges among NAFMII members; initiate and manage the
research and development of new products that are demanded by members, suitable to
the characteristics of the CIBM and in accordance with relevant state stipulations to
promote standardized business operation and business management;
viii. collect, prepare, and publish relevant market data and information to serve
NAFMII members;
ix. conduct studies on issues related to market development, offer NAFMII members
suggestions on business expansion, and provide ideas for market development to
relevant supervisory authorities;
x. carry out other work aimed at fulfilling NAFMII’s purpose; and
xi. undertake other duties and responsibilities bestowed by the Congress of
NAFMII and those delegated by the PBOC.
Issuers in the CIBM need to register with NAFMII and also have their nonfinancial enterprise
debt financing instruments registered with NAFMII prior to issuance (exceptions apply, see
section F for details). Other CIBM market participants and intermediaries—including
underwriters, accounting and auditing firms, law firms, and CRAs—should be members of
NAFMII. NAFMII issues underwriting and lead underwriting licenses for debt financing
instruments of nonfinancial enterprises to qualified financial institutions who must be its
members; please see section M for a description of what qualifications are to be met by
underwriters. NAFMII also tracks and evaluates the performance of underwriters as well as
market makers and issues its findings and corresponding rankings on an annual basis. In
addition, NAFMII admits CRAs and administers their licenses in the CIBM, and accepts filings
from and administers bond trustees.
Investors need not be NAFMII members by default; however, the two types of PPN
institutional investors, DIIs and SIIs, must be members of NAFMII.
For details on the membership, roles, and responsibilities of NAFMII in the context of the
issuance, trading, and continuous disclosure on debt financing instruments in the CIBM, as
well as governance of the CIBM, please see sections G and H in this chapter.
6. National Development and Reform Commission (国家发展和改革委员会)
NDRC is the government agency responsible for supervising the issuance of enterprise bonds (
企业债券); see also Chapter for more information on the types of bonds issued in the
CIBM. For historical reasons, enterprise bonds have always been supervised by NDRC, being
a government agency overseeing SOE reform. NDRC also oversees credit ratings for enterprise
bonds.
The NDRC’s Department of Fiscal and Financial Affairs is responsible for studying and
analyzing the capital balance of the whole society; studying fiscal and monetary policies and
issues of fiscal and financial system reform, and analyzing the
implementation of fiscal and monetary policies and making recommendations in this regard;
putting forward development strategies and policy recommendations concerning direct
financing; reviewing and approving securities issuance of nonlisted companies; and taking the
lead in promoting the development of investment funds and venture funds, as well as the
development of relevant
7. State Administration of Foreign Exchange (国家外汇管理局)
SAFE is an administrative agency tasked with drafting the rules and regulations governing
foreign exchange market activities and managing the state foreign exchange reserves for the
PBOC. The major functions of SAFE include the following:
i. study and propose policy suggestions on reform of the foreign exchange
administration system, prevention of balance-of-payments risks, and promotion of
balance-of-payments equilibrium; study and implement policy measures for the
gradual advancement of the convertibility of the Chinese renminbi under the capital
account and the cultivation and development of the foreign exchange market; and
provide suggestions and a foundation for the PBOC to formulate policy on the
Chinese renminbi’s exchange rates;
ii. participate in the drafting of relevant laws, regulations, and departmental rules on
foreign exchange administration, releasing standard documents related to carrying out
these responsibilities;
iii. oversee the statistics and monitoring of the balance of payments and external credit
and debt, releasing relevant information according to regulations and undertaking
related work concerning the monitoring of cross-border capital flows;
iv. supervise and manage the foreign exchange bond market of the state, undertake
supervision and management of the settlement and sale of foreign exchange,
cultivate and develop the foreign exchange market;
v. supervise and check the authenticity and legality of the receipt and payment of foreign
exchange under the current account according to law; implement foreign exchange
administration under the capital account according to law, and continuously improve
management work in line with the convertibility process of the Chinese renminbi
under the capital account; and regulate management of overseas and domestic foreign
exchange accounts;
vi. supervise and check foreign exchange according to law and punish behavior that
violates the foreign exchange administration;
vii. undertake operation and management of foreign exchange reserves, gold
reserves, and other foreign exchange assets of the state;
viii. arrange development planning, standards, and criteria for information- technology-
based foreign exchange administration, and organize the relevant implementation;
supervise information-sharing with the relevant administrative departments according
to law;
ix. take part in relevant international financial activities; and
x. undertake other matters as assigned by the State Council and the PBOC.
In relation to the CIBM, SAFE had been responsible for allocating and supervising the QFII
and RQFII quotas (until September 2019), and it continues to provide approval on the issuance
of Panda bonds by nonresident issuers. Please also see section N in this chapter for a detailed
description of the QFII and RQFII concepts and the related role of SAFE.
15 See
E. Regulatory Framework for Debt Financing Instruments
The regulatory framework for debt financing instruments in the PRC is very much dependent
on the type of bond and the market in which it is intended to be traded. For example, for the
purpose of issuing bonds, different provisions apply to different types of bonds with respect to
their governing regulatory authority, information disclosure, and credit rating, among others
(Table ).
Table : Overview of Regulatory Framework for Debt Financing Instruments in the
Inter-Bank Bond Market
Main regulator People’s Bank of China (PBOC)
Additional regulators
China Banking and Insurance Regulatory Commission (CBIRC)
China Securities Regulatory Commission (CSRC)
National Development a
