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Beijing woos global bond investors by making it easier to get money in and out of China

China says it will let foreign bond investors transfer money into and out of the country more freely, allowing them easier access to the onshore bond market, in Beijing’s latest move to deepen financial links with the outside world.

Foreign institutional investors such as central banks, investment banks, wealth-management firms and insurance companies will be allowed to repatriate a larger amount of funds into the currency of their original investment without restrictions, according to a draft regulation published by the People’s Bank of China and the State Administration of Foreign Exchange (SAFE) on Monday.

The draft will be open for public feedback until October 20 and rule changes are expected to come into effect soon afterwards.

Under the new rules, a foreign investor will be able to open a bond investment account at a custodian bank in China, and this will allow firms to bring in money directly to buy domestic bonds. If the firm brings in US dollars, it will be able to repatriate funds in US dollars; and if it brings in yuan, it can repatriate yuan out of the country.

The only restriction is that it cannot bring in one currency and repatriate profits in another, thereby avoiding foreign exchange arbitrage. For investments in both yuan and foreign currencies, the amount of foreign currency being repatriated will be capped at 1.2 times its original investment in that currency, an upwards adjustment from 1.1 times previously. Read More

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