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19 October 2018
On 25 September 2018 the People's Bank of China (PBC) and the Ministry of Finance jointly issued the Interim Measures for the Administration of Bond Issuance by Overseas Institutions in the National Inter-bank Bond Market (Notice  16), which came into effect on the same date. As a result of the new measures, the Interim Measures for the Administration of Issuing Rmb Bonds by International Development Institutions (PBC, Ministry of Finance, National Development and Reform Commission and China Securities Regulatory Commission Notice  10) have been formally abolished.
Bonds which are renminbi yuan denominated and issued by non-Chinese entities in the China interbank bond market (CIBM) are known as 'panda bonds'. The new measures further clarify the qualification, application procedure, bond issuance, registration, custody and settlement and information disclosure requirements for overseas institutions that issue panda bonds, as well as the requirements governing:
The new measures have made the following improvements to promote the opening up of the CBIM.
Uniform rules for bond issuance by different overseas institutions
The old measures applied only to bond issuance by international development institutions operating in the CIBM. No clear rules applied to bond issuance by other overseas institutions, even though foreign sovereigns, overseas financial institutions and non-financial enterprises also issue bonds in the CIBM. Based on pilot programmes and international practice, the new measures provide clear, uniform rules for bond issuance by other overseas institutions, including foreign sovereigns, international development institutions, overseas financial institutions and non-financial enterprises.
Approval and registration
In order to issue bonds, overseas financial institutions must obtain approval from and submit to the PBC their:
Foreign sovereigns, international development institutions and non-financial enterprises must apply to the National Association of Financial Market Institutional Investors (NAFMII) for registration.
Foreign sovereigns and international development institutions must have bond issuance experience and an adequate debt servicing capacity.
Overseas financial institutions must:
Notably, the new measures do not address bond issuance by overseas non-financial enterprises. The NAFMII is expected to issue specific guidelines on bond issuance by these enterprises in the near future.
Overseas institutions are no longer required to issue credit rating reports to undertake bond issuance.
According to the new measures, overseas institutions are not required to adopt the Chinese generally accepted accounting principles (GAAP). Instead, they can adopt other accounting principles as long as they disclose the key differences between these and the Chinese GAAPs.
Issuance documents need not be written in Chinese; rather, they can be written in simplified Chinese or translated into simplified Chinese from other languages.
Under the old measures, Chinese laws applied to bond issuance by international development institutions. However, the new measures remove this mandatory provision regarding the applicable laws. As such, overseas institutions can now choose the laws which apply to their bond issuance.
The new measures are an important step towards opening up the CBIM. They improve the publicity of the bond issuance mechanism for overseas institutions, enhance issuance efficiency and promote bond issuance by overseas institutions. They also:
For further information on this topic please contact Wu Jiejiang at Jingtian & Gongcheng by telephone (+86 10 5809 1000) or email (email@example.com). The Jingtian & Gongcheng website can be accessed at www.jingtian.com.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
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