China News Service, September 21. According to the website of the State Administration of Foreign Exchange on the 21st, in order to promote the overall opening of China’s bond market, the People’s Bank of China and the State Administration of Foreign Exchange drafted the “Regulations on the Fund Management of Foreign Institutional Investors’ Investment in China’s Bond Market (Solicitation Opinion Draft)” (hereinafter referred to as the “Regulations”) is now open to the public for comments.
Among them, it is mentioned that optimizing the matching management of inward and outward currencies, and intends to remove the restrictions on the remittance ratio of single currency (RMB or foreign currency) investments under the principle of basic matching between domestic and foreign currencies.
Screenshot of the website of the State Administration of Foreign Exchange
According to reports, in terms of drafting ideas, the "Regulations" are a supporting policy for the overall opening up of the Chinese bond market, aiming to coordinate the participation of foreign institutional investors in the management of investment transactions in the Chinese bond market, and to uniformly standardize the direct market/onshore custody model of capital accounts, Exchange and foreign exchange risk management (excluding "Bond Connect"), and further optimize the management of fund remittances.
One is the registration of investment capital information.
In accordance with the relevant provisions of the "Regulations of the People's Republic of China on Foreign Exchange Administration," and with reference to internationally accepted practices, the investment capital information is registered.
After foreign institutional investors have entered the market for filing, they can directly register in the capital account information system of the State Administration of Foreign Exchange through the domestic custodian (or settlement agent/account opening bank).
The second is to unify capital management and foreign exchange risk management.
Unify the management of accounts, fund receipts and payments, foreign exchange, foreign exchange risk hedging, statistical monitoring, etc. involved in foreign institutional investors investing in the Chinese bond market, and integrate multiple current decentralized regulatory documents to form unified management practices to facilitate operations by foreign institutional investors .
The third is to optimize the matching management of inward and outward currencies.
Under the principle of basic matching between domestic and foreign currencies, the restriction on the remittance ratio of single currency (RMB or foreign currency) investments will be removed; for foreign institutional investors investing in "RMB + foreign currency", only certain matching requirements will be imposed on foreign currency remittances. And relax the remittance ratio from 110% to 120%, effectively meeting the needs of overseas institutional investors for remittance.
The fourth is to remove restrictions on the spot foreign exchange settlement and sale.
The restriction on foreign institutional investors' handling of spot foreign exchange settlement and sale through settlement agents is removed, and other domestic financial institutions qualified for the business of foreign exchange settlement and sale are allowed to handle spot foreign exchange settlement and sale for foreign institutional investors.
In terms of registration management, the "Regulations" clarify the registration process of capital information for foreign institutional investors investing in the Chinese bond market, as the basis for subsequent account opening, capital exchange, and balance of payments statistics reporting.
In terms of account and fund management, the first is to clarify the opening conditions and scope of income and expenditure for special accounts for foreign institutions investing in the Chinese bond market.
The second is to clarify the rules for the integrated management of domestic and foreign currencies, allowing overseas institutions to independently choose the currency of remittance (inward), and optimize the matching management of domestic and foreign currencies.
The third is to standardize foreign exchange management and allow domestic third-party financial institutions qualified for foreign exchange settlement and sale to handle spot foreign exchange settlement and sale for foreign institutional investors.
The fourth is to clarify the convenience of domestic transfer of funds, and allow the funds under QFII/RQFII projects and direct market entry projects of the same foreign institutional investor to be transferred to each other.
In terms of foreign exchange risk management, the "Regulations" extend the foreign exchange risk management policy of the inter-bank bond market to cover the exchange bond market.
Incorporate the relevant content of foreign exchange risk management into the "Regulations" to form a unified system and norms.
In terms of statistical supervision, stipulate compliance review and data reporting requirements, clarify violation clauses and supervision penalties.