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    Chinese Authorities Advance Reform on Corporate Credit Bond Market

    August 23, 2021

    The People’s Bank of China (PBC), the Ministry of Finance, the China Banking and Insurance Regulatory Commission (CBIRC), the China Securities Regulatory Commission, and the State Administration of Foreign Exchange jointly issued "guiding opinion on advancing the reform, opening up, and high-quality development of the corporate credit bond market." The publication offers guidance aimed at improving the legal system, promoting category-based convergence in the management of bond issuance and trading, enhancing the effectiveness of information disclosure, and tightening regulation over credit rating agencies.

    The guidance also covers strengthening investor suitability management, improving the mechanisms of pricing, enhancing regulation and unifying law enforcement mechanisms, conducting macro management in a coordinated way, advancing the building of a multi-tiered market, and promoting high-standard opening-up. The guiding opinion highlights the need to continuously consolidate the foundation of the legal system of the corporate credit bond market and promote research to formulate administrative regulations on corporate bonds. In line with the principle of category-based convergence, the rules and standards for issuance, trading, information disclosure, and investor protection in the corporate credit bond market will be gradually unified. The issuance of bonds shall align with China’s macroeconomic and industry development policies, while the structured issuance of bonds shall be prohibited. 

    The guiding opinion is intended to ensure that borrowers make repayments and bear the risks on their own and to prevent hidden debt risks facing local governments. As stated in the Opinions, coordinated efforts will be made to advance the building of a multi-tiered bond market, improve the lines of products and instruments, increase qualified investors, and develop a multi-tiered system of trading services. A centralized and unified national system of registration and settlement rules will be established, which will focus on single-level custody, with inclusive institutional arrangements for multi-level custody. Banks will be encouraged to conduct fund settlements for bond trading. Moreover, coordinated efforts shall be made to synchronize the opening-up of the interbank bond market and the stock exchange bond market and to exercise unified management of bond market access for overseas institutional investors as well as cross-border fund flows, thus jointly promoting unified opening-up.

    Keywords: Asia Pacific, China, Banking, Securities, Credit Risk, Loan Repayment, Disclosures, Credit Rating Agencies, Bond Market, CBIRC, PBC

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