China's Bond Market Opens Up to Overseas Institutional Investors

Strategic Insights -

China's bond market has seen a significant influx of foreign institutional investors in recent years, with a total of 1,170 foreign institutions from 80 countries and regions having entered the market by the end of August 2025, holding approximately 4 trillion RMB in total debt. The attractiveness and international influence of China's bond market have been growing steadily, with Chinese bonds being included in the three major international bond indices: Bloomberg Barclays, JPMorgan Chase, and FTSE Russell. To further support the needs of overseas institutional investors for liquidity management through bond repurchases, the People's Bank of China, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange jointly issued an announcement to support various types of overseas institutional investors in conducting bond repurchase business in the Chinese bond market.

Key Takeaways:

  • The announcement aims to support overseas institutional investors in conducting bond repurchase business in the interbank bond market, including foreign central banks, international financial organizations, sovereign wealth funds, and various financial institutions.
  • The method for overseas institutional investors to conduct bond repurchase transactions will adopt the common practice in the international market, transferring and using the underlying bonds.
  • Overseas institutional investors can participate in bond repurchase business in the interbank bond market, including those entering the market through direct market access and Bond Connect.
  • The announcement will facilitate a smooth transition for overseas institutional investors already engaged in bond repurchase transactions in the interbank bond market, allowing them to continue conducting transactions under their original model during a 12-month transition period.
  • Coordinating openness and security is the foundation for high-level opening of the financial market and a key principle for promoting bond repurchase transactions by overseas institutional investors.
  • Market makers will be selected from open market primary dealers with outstanding Bond Connect market making performance, and their list will be announced by the National Interbank Funding Center.

The announcement has clarified the specifics of bond repurchase business for overseas institutional investors, including the management requirements for the collection and payment of bond repurchase funds. The relevant funds collection and payment must comply with the fund and account management regulations of the investment channels corresponding to their spot transactions. The People's Bank of China, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange have taken measures to strengthen the design of transaction, custody, settlement, and foreign exchange processes for bond repurchase transactions conducted by overseas institutional investors, and to achieve closed-loop fund management. Penetrating supervision and monitoring through transaction and custody data reporting will also be strengthened.

Statistics:

  • As of the end of August 2025, a total of 1,170 foreign institutions from 80 countries and regions have entered China's bond market, holding approximately 4 trillion RMB in total debt.
  • The attractiveness and international influence of China's bond market have been growing steadily, with Chinese bonds being included in the three major international bond indices: Bloomberg Barclays, JPMorgan Chase, and FTSE Russell.
  • The announcement aims to support various types of overseas institutional investors in conducting bond repurchase business in the Chinese bond market.

Sources:

  • People's Bank of China
  • China Securities Regulatory Commission
  • State Administration of Foreign Exchange
  • Announcement on Further Supporting Overseas Institutional Investors in Conducting Bond Repurchase Business
  • People's Bank of China, China Securities Regulatory Commission, and State Administration of Foreign Exchange Announcement [2022] No. 4