(Yicai Global) June 1 -- China's central bank issued Interim Measures for the Management of Bond Connect Between Mainland and Hong Kong Bond Markets yesterday.
International investors who meet the central bank's requirements will be allowed to invest in all bonds that are traded and circulated on the interbank market through 'northbound trading' using either yuan or foreign currency, the draft said. No restriction will be placed on the amount foreign investors can use for northbound trading. Repayment of bonds purchased with foreign currency through northbound trading will be made in foreign currency, and northbound trading will be monitored alongside the foreign exchange market.
The link between the mainland and Hong Kong bond markets, Bond Connect, facilitates northbound trading and southbound trading. Northbound trading is the mechanism investors from Hong Kong and other countries and regions use to trade onshore bonds on the mainland interbank bond market. Southbound trading enables mainland Chinese to invest in the Hong Kong bond market.
Measures for southbound trading will be formulated separately.