Chinese Central Bank ‘Successfully fulfill the Whole Range of Work and Actively Support Pilot Sites

Cross-boarder trade business in RMB has been operating steadily since the pilot sites for cross-border trade settlement in RMB put into practice in 2009. At present, pilot sites have spread to 20 provinces, autonomous regions and municipalities. With the development of the cross-border trade settlement in RMB pilot sites and the increasing number of overseas organizations that hold RMB, objectively, there is a need for purchasing financial assets. In order to facilitate the pilot sites for cross-border trade settlement in RMB and widen the channel of RMB repatriation, People's Bank of China released Circular of Relevant Issues on Three Kinds of Institutions’ (including Overseas RMB clearing banks) Investment in the Pilot Sites of Inter-bank Bond Market with Renminbi (Yinfa [2010] No. 217) on August 16, 2010. According to the circular, relevant overseas organizations will be allowed to enter the inter-bank bond market investment pilot sites. In addition, the circular also made clear definition on the limits of overseas organizations, entrance standards and operation models of investment.

During the trial period, clearing banks of RMB services in Hong Kong and <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Macao, overseas participating bank in cross-border trade RMB settlement, overseas central banks and overseas monetary authorities are all allowed to apply for investment in inter-bank bond market. Approved by the People's Bank of China, overseas institutions can invest in inter-bank bond market by RMB Funds which are acquired from monetary cooperation with the central bank, cross-border trade and RMB investment business within the scale of approval. Moreover, in order to prevent risks and ensure a stable market, the Circular also made concrete statements towards several aspects, including operation models, affiliated transactions and market supervision.

At present, there are more than ten types of bonds in the inter-bank bond market, including government bonds, policy bank bonds and financial bonds, which are the platform for RMB investors to conduct liquidity risk management as well as assets and liabilities management. Allowing relevant overseas organizations to invest in inter-bank bond market can make it possible for the RMB funds gained by overseas organizations in accordance with laws inflation-proofed which is also a necessary measure for cross-boarder trade RMB settlement and will undoubtedly promote the development of cross-boarder.