China’s central bank will allow private funds into the interbank bond market as the government seeks to make it easier for companies to access capital amid an economic slowdown.
The net assets of private funds entering the market shouldn’t be less than 10 million yuan ($1.6 million), according to a person familiar with the matter, who asked not to be identified ahead of a public announcement. The amount of bonds outstanding in China has almost doubled in the past six years to 29.6 trillion yuan at the end of May, 93 percent of which are in the interbank market, ChinaBond data show.
More investor participation in China’s onshore note market may help lower companies’ borrowing costs as well as curb demand for shadow-banking products that regulators are seeking to clamp down on. Corporates in the world’s second-biggest economy are grappling with growth that was the slowest since March 2009 last quarter and trying to find funds to repay a record amount of notes due this year.
Officials at the central bank didn’t immediately respond to a fax seeking comment on the change.
Allowing private funds into the interbank market should broaden and diversify the investor base, plus better serve the real economy, the person familiar said. The financial market department of the People’s Bank of China released a document outlining the changes on Monday, they said.
The PBOC said on June 11 China will “actively encourage” foreign central banks to include yuan-denominated assets in their foreign-exchange reserves and may scrap limits on how many onshore yuan bonds they can buy.
Reuters reported on entry of private investment funds into the interbank market earlier today.
— With assistance by Judy Chen, and Laura Yin