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Article (8/251)
China Interbank Bond Market (CIBM Direct) regulation - regulation memo
China Interbank Bond Market (CIBM Direct) regulation - regulation memo

China Interbank Bond Market (CIBM Direct) regulation - regulation memo


CIBM Direct creates a route for international investors to access Chinese onshore bonds, complementing long-established QFII and RQFII schemes.

China Interbank Bond Market (CIBM Direct) regulation: what is it?

The Chinese bond market is the second largest in the world (USD 13.9 trillion in Q3 2019, source BIS). Announced in February 2016, the liberalisation of the domestic bond market through the CIBM Direct scheme was a further step in opening up Chinese financial markets to international investors and encouraging them to invest in Renminbi.

The CIBM Direct scheme created a route for international investors to access onshore bonds, complementing long-established QFII and RQFII schemes.

Under the CIBM Direct scheme, foreign institutions can trade bonds directly through banks holding a Type A licence in Mainland China (with only six foreign banks including BNP Paribas).

The CIBM market can also be accessed via Bond Connect through Hong Kong.


Under the CIBM framework, international investors are able to access cash bonds (both rates and credit bonds).

The CIBM scheme applies to a large range of investors: commercial banks, asset managers, insurers, securities houses, pension funds, charitable funds and other long-term investors approved by People’s Bank of China (PBoC).

It defines three categories of investors:

  • Type A investors (such as BNP Paribas) can trade, settle and provide custody for interbank bond market instruments both for themselves and on behalf of Type C investors.
  • Type B investors can trade and settle in the interbank bond market for themselves, and trade directly with others.
  • Type C investors must appoint a Type A investor for settlement to carry out bond trading on their behalf. As of December 2018, all foreign investors are Type C.

Further clarification on the CIBM Direct model

  • There is no restriction on the currency of the investment principal remitted from offshore.
  • Onshore FX conversion and hedging of FX risk for the CIBM investments are permitted without any pre-approval from SAFE. The FX derivatives available onshore include: FX Forward, Swap, CCS and vanilla options.
  • Onshore Bond and IR derivatives are permitted for hedging purpose, including Bond Lending, Bond Forward, IRS and FRA.
  • Master Agreement is needed for entering derivatives onshore:
    • ISDA or NAFMII for FX products;
    • NAFMII for IR and Bond derivatives.
  • Currency ratio control or currency scale control is imposed on funds to allow the bond settlement agent to monitor the RMB/FCY ratio as required by Chinese regulator:
    1. Ratio control: The ratio of RMB to FCY (currency ratio) shall generally match the original currency ratio when the investment principal was remitted into China, with a maximum permissible deviation of 10%. Such ratio requirement can be waived for the first repatriation, provided that the FCY or RMB capital amount to be repatriated may not exceed 110% of the FCY or RMB amount remitted into China in aggregate.
    2. Scale control: investors are allowed to repatriate up to 110% of accumulated FCY injected and 110% of accumulated RMB injected. Calculation formula is RMB outflow total amount/CNY inflow total amount ≤ 110%; FCY outflow total amount/FCY inflow total amount ≤ 110%
  • There is no lock-up period.

Industry implications

Before trading, offshore investors (including those with a QFII or RQFII licence) must appoint an onshore settlement agent. The settlement agent submits the two-page filing form, which contains basic information and the settlement agent agreement signed by the onshore settlement agent and its client.

PBoC will acknowledge the filing within 20 calendar days (usually 10 calendar days). The settlement agent manages the account opening on behalf of its clients – on a segregated basis – with the China Foreign Exchange Trade System (CFETS), China Central Depository & Clearing (CCDC) and the Shanghai Clearing House (SHCH). The settlement agent manages the offshore investor’s daily transactions and mandatory reporting to regulators (if required).

The CIBM Direct scheme complements long-established QFII and RQFII schemes and significantly facilitates access to the Chinese fixed income market for foreign institutional investors:

  • Investment quotas are removed under this scheme.
  • The process is easier: a simple registration to PBoC is required before trading.

BNP Paribas (China) Ltd. was granted a Type A licence by PBoC in March 2015 and can provide settlement agent and custodial services for foreign investors (Type C) who have an interest in the China Interbank Bond Market.

BNP Paribas Securities Services' view

We welcome this major step in the continuing liberalisation of China’s financial markets. It enables international investors to diversify their fixed income portfolios, and gain access to this rapidly growing and increasingly important market. In addition, as international credit rating agencies are allowed to establish a presence in China since July 2017, foreign investors may be more secure in gauging Chinese corporate debt, which may be complex.

Foreign institutional investors are able to rely on a single Type A partner – such as BNP Paribas (China) Ltd. – to access the onshore fixed income market. In this role, BNP Paribas (China) Ltd. fully manages the administrative process required to gain access to the scheme and ensure a seamless process from trade execution to settlement and custody.

Key dates

March 2015 - BNP Paribas (China) Ltd. granted Type A licence by People’s Bank of China (PBoC)

February 2016 - PBoC announcement of the new scheme to invest on CIBM

Q1 2017 - Offshore investors can hedge their forex exposure linked to their bond positions

June 2017 - The settlement cycle can be T+2 for offshore investors, in addition to the existing T+0 and T+1 cycle

June 2018 - Direct CIBM investors can hedge RMB fx risk offshore, enjoying onshore RMB exchange rate through offshore RMB participating Banks.

November 2018  - Three-year income tax and VAT exemption on bonds interest granted to all foreign investors

August 2019 - The settlement cycle can be T+3 for offshore investors, in addition to the existing T+0, T+1 and T+2 cycleJanuary 2020 – Direct CIBM investors are offered with more channels to hedge their FX risk onshore

March 2020 – Non-standard settlement cycle T+N (N≥4) and recycling settlement is available to offshore investors for the cash bond settlement


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