China increases opening-up efforts in credit rating, bond market

China has taken a further step in opening up its financial markets with a slew of new measures announced, allowing more participation of foreign institutions in credit rating business and the bond market.

China will permit foreign-funded agencies to conduct credit rating business with all kinds of bonds traded in China's inter-bank and exchange market, the office of financial stability and development committee under the State Council, the cabinet, announced on July 20.

As the internationalization of China's financial market accelerates, the move is of positive significance to the healthy and normative development of China's financial market, said the People's Bank of China (PBOC).

In January 2018, S&P Global (China) Ratings, a company wholly-owned by the leading global ratings firm, was granted access into China's interbank bond market for all forms of credit rating businesses, covering financial institution bonds, non-financial corporate debt financing instruments, structured products and offshore bonds.

According to the PBOC, introducing international credit rating agencies to conduct ratings in China is conducive to meeting the diverse needs of international investors and improving the quality of China's rating industry.

The PBOC said it would, together with the country's securities regulator, promote wider opening-up in the ratings sector by allowing more qualified foreign-funded rating agencies to develop businesses in China’s inter-bank and exchange bond market.

Giving the green light to foreign-funded institutions to obtain type-A major underwriting licenses in the inter-bank bond market was also among the new opening-up measures.

In recent years, China's bond market has seen significant growth in both the number of foreign issuers and the amount of foreign investment, while the number of foreign intermediaries has continued to grow.

As of now, a total of six foreign-funded banks have obtained type-B qualifications for major underwriting and underwriting business of non-financial enterprise debt financing instruments.

The permission for type-A major underwriting business will help enrich the means for foreign institutions to serve China's real economy, while introducing more overseas investment demand for domestic enterprises' bond financing, a PBOC official said.

China will facilitate foreign institutional investors in investing in the inter-bank bond market, which was included in the new measures to optimize the opening-up of the financial sector.

"In order to achieve this, it is necessary to integrate policies and requirements regarding different open channels and link up accounts of bond and capital," said the official.

By satisfying the differentiated needs of investors, the measure will improve the convenience for foreign investors to invest in the market, which reflects the high-level opening-up required for the financial market, the official added.