BEIJING, Sept. 22 (Xinhua) – Chinese central bank and the State Administration of Foreign Exchange (SAFE) on Monday started soliciting public opinions on the draft fund management rules on foreign institutional investors' investment in domestic bond market, reported Shanghai Securities News Tuesday.
The Chinese regulators said the draft rules are policies mapped out to support China's overall bond market opening up, dedicated to unifying fund accounts, remittance and foreign exchange risk management under the direct entry (into China's bond market) or onshore custody modes to further optimize fund entry-exit management.
The draft provides that foreign institutional investors can select the currency of remittance to invest in China's bond market and are encouraged to use Renminbi (RMB) for cross-border fund receipt and payment or complete cross-border RMB settlement via the Cross-Border Interbank Payment System (CIPS), an "expressway" designed to facilitate use of RMB in international trade and investment.
Unified fund and foreign exchange risk management rules will be formed to regulate management of accounts, capital receipt and payment, remittance, foreign exchange risk hedging, statistical work and monitoring related to foreign institutional investment in China's bond market in a bid to facilitate operations of foreign institutional investors.
The draft requires foreign institutional investors to use in principle the same foreign currency in inward and outward fund remittance for their investment in China's bond market and not to conduct cross-currency arbitraging between RMB and other currencies.
Under the principle of realizing a basic balance between RMB and foreign currencies, the proportion cap on outward remittance of a single currency including RMB or other currencies are canceled for foreign institutions' investment in China's bond market, according to the draft.
For foreign institutions using RMB and other currencies to invest, only outward remittance of foreign currencies are regulated and the outward remittance proportion is lifted from 110 percent to 120 percent of the funds remitted in to better satisfy outward fund remittance demand of foreign institutional investors.
The draft also cancels restrictions over foreign institutional investors conducting spot foreign exchange purchasing and sale through settlement agents and allows other qualified financial institutions in China to provide such services for them. (Edited by Duan Jing with Xinhua Silk Road, duanjing@xinhua.org)
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