The People’s Republic of China (PRC) has undertaken steps to develop its bond market. Details of these measures are discussed in this section.
Policy Initiatives and Reforms
Market-Based Interest Rate Reform
The People's Bank of China (PBC) is taking steps to advance market-based interest rate reform. Among its priorities is a widening of the floating band on lending rates. The interest rate in the corporate bond market will also be allowed to move within a wider range.
Market-based interest rate reform is significant to the formation of an effective benchmark yield curve. To achieve this, the Government will issue more types of bonds to ensure a sufficient array of instruments at various maturities.
Rules on Bond Issuance
In September 2003, the Government allowed securities companies with minimum net assets of CNY1 billion (USD 121 million) and a record of profits in the previous year to issue bonds to the public or to qualified investors.
The Government is also planning to further expand the scale and type of corporate bonds enterprises can issue. One of the initiatives being considered is to allow small- and medium-sized enterprises (SMEs) to jointly issue domestic bonds.
Capital Market Development
PBC is promoting the development of capital markets, according to the PBC's Monetary Policy Goals for 2004. Among its objectives are support for the creation of a unified securities market and the improvement of the registration and settlement system for securities transactions.
Mainland and Hong Kong Closer Economic Partnership Agreement (CEPA)
The Securities and Futures Commission of Hong Kong, China and the China Securities Regulatory Commission (CSRC) have agreed to mutually recognize each other's securities and futures qualifications for practitioners, pursuant to their commitments under the CEPA. This aims to facilitate the flow of qualified personnel and expertise between the PRC and Hong Kong, China. The CEPA became effective in January 2004.
PBC and the Hong Kong Monetary Authority have (HKMA) have also signed a Memorandum of Cooperation that allows banks in Hong Kong, China to conduct yuan businesses such as deposit taking, CNY–HKD exchange, cash remittance, and credit card services.
World Trade Organization (WTO) Commitments in Banking and Other Financial Services
The PRC's commitments for banking and other financial services under the WTO include the removal of all non-prudential measures restricting ownership, operation, and juridical form of foreign financial institutions, including regulations on internal branching and licenses geographic restrictions within five years after accession.
PRC has been a member of the WTO since December 2001.