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BOC Consultation on Allowing Transfer of Bonds and Funds between QFII/RQFII and CIBM Direct Accounts

2019.05.16 XIE, Qing (Natasha)、ZHANG, Chi

On May 10, 2019, the People’s Bank of China (“PBOC”) and State Administration of Foreign Exchange (“SAFE”) published their joint consultation on the Notice on Issues Related to Further Facilitating Foreign Institutional Investors’ Participation in China Interbank Bond Market (the “Consultation Paper”). 

The Consultation Paper proposes the following in order to further facilitate China Interbank Bond Market (“CIBM”) investments made by foreign institutional investors.

1. A foreign institutional investor can transfer its CIBM bonds held under either the QFII/RQFII schemes or the CIBM Direct scheme to the other scheme via a non-trade transfer.

2. A foreign institutional investor can transfer onshore funds between its QFII/RQFII custodian accounts and CIBM Direct cash accounts.

3. A foreign institutional investor accessing the CIBM via both QFII/RQFII and CIBM Direct will only need to file once with the PBOC Shanghai Headquarter, via either its QFII/RQFII custodian bank or the CIBM Direct settlement agent bank.

A foreign institutional investor, through its QFII/RQFII custodian bank or the CIBM Direct settlement agent bank, may (i) make an application for a non-trade transfer of its CIBM bond holdings to China Central Depositary & Clearing Co., Ltd. and Shanghai Clearing House (collectively the “Clearing Houses”); and/or (ii) make an application to transfer onshore cash between its QFII/RQFII custodian accounts and CIBM Direct cash accounts. 

The application materials and detailed procedures for the aforementioned non-trade transfers of bonds shall be subject to the business guidelines issued by the Clearing Houses. When completing the non-trade transfers of bonds or onshore cash transfers on behalf of foreign institutional investors, the relevant QFII/RQFII custodian bank and CIBM Direct settlement agent bank shall submit a declaration on a virtual basis for the balance of international payments and receipts in accordance with relevant requirements, and shall report the information relating to the onshore fund transfers of foreign institutional investors to the RMB Cross-border Payment and Receipt Management Information System.

The release of the Consultation Paper indicates that the relevant regulators are actively taking into consideration any reasonable suggestions from foreign market participants. The regulators appear to be aiming to resolve some of practical difficulties and concerns faced by foreign investors as they invest in the onshore bond market, in order to further facilitate investment by foreign institutional investors in the CIBM. 

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