China Sovereign Fund Huijin Gets Access to Trade Banks’ Bonds

Central Huijin Investment Ltd., the sovereign investor that holds stakes in China’s biggest banks, received approval to trade on the interbank bond market, giving the government another way to support the nation’s lenders.

The authorization was granted by the Shanghai office of the People’s Bank of China, according to a statement posted on, a website of the China Foreign Exchange Trade System. Huijin owns shares in banks including Industrial & Commerical Bank of China Ltd., the world’s most profitable. Huijin didn’t immediately reply to an e-mail seeking comment.

The fund gains access to a market where the value of outstanding bonds reached 25.7 trillion yuan ($4.2 trillion) in October, triple the amount five years earlier. The move allows Huijin to buy banks’ subordinated bonds that include the possibility of a writedown, said Dong Hui, a fixed-income analyst at China Securities Co. in Beijing.

“Huijin is not your traditional investor -- its purpose has always been to support government policies,” Dong said by telephone. “Subordinated bonds with the writedown feature haven’t been well received by the market.”

China’s four biggest commercial lenders outlined plans this year to sell as much as 230 billion yuan of the junior bonds. Holders of the notes get paid after senior bondholders in a bankruptcy and the value of the debt can be reduced if the issuer faces financial difficulty.

China on Dec. 8 issued rules for trading of certificate of deposits on the interbank market, giving banks a new way to raise funds as the government prepares to end limits on the interest they’re allowed to pay on savings.

— With assistance by Aipeng Soo, and Nathaniel Espino

Before it's here, it's on the Bloomberg Terminal.