China Announces New Bond Regulations to Attract Foreign Investors

Chinese regulators released new guidelines on Friday to improve the country’s bond market for foreign institutional investors by expanding currency hedging channels and facilitating the repatriation of funds.

The People’s Bank of China announced that the rules “will be conducive to further facilitating foreign institutional investors’ investment in China’s bond market,” the most recent of several steps taken in recent months to make the bond market more attractive to foreign investors.

With the new regulations coming into effect on January 1, 2023, China will actively push foreign institutional investors to use the yuan in cross-border settlements and to complete deals through China’s Cross-Border Interbank Payment System (CIPs).

The changes will make it possible for institutional investors to move money between their bond market special accounts and their QFII and RQFII accounts, which are denominated in yuan.

Goldman Sachs is bullish on China’s stock markets, expecting that it will outperform in 2023 as Beijing relaxes its Covid-Zero policy and the global environment improves.

Analysts at Goldman Sachs predicted that the MSCI China benchmark and the CSI 300 Index will both increase by 16% over the following 12 months, the highest gains in the region.

“Regional equity leadership may shift north after Asean and India strength in 2022 as China markets rebound and Korea anticipates recovery,” the analysts said.