China's central bank said on Thursday that foreign investors would be permitted to trade in bond derivatives in the country's interbank market. The People's Bank of China said in a statement that overseas institutional investors are now permitted to "conduct bond lending, bond forward, forward rate agreement...interest rate swap and other transactions based on hedging demands" in addition to cash bond transactions.
The central bank's statement, posted on the website of the China Central Depository and Clearing Co (CCDC), the country's primary bond clearing house, added that overseas yuan clearing banks and "participating banks" would be allowed to conduct bond repo transactions in the interbank market. Transactions are not subject to an investment quota, the statement said, but all overseas institutional investors are required to sign an agreement on derivatives trading before conducting the transactions.