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China Welcomes Foreign Bond Investors with Strict Regulations on Forex Transactions

March 1, 2017
By Daisy Joseph
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In an attempt to stabilize and improve the financial markets, China has decided to welcome foreign investors to invest in Chinese bonds. Pan Shenggong, governor of the Public Bank of China (PBOC) said that the outstanding corporate bonds have reached 16.5 trillion Yuan, pushing China to become the first in Asia and second in the world. In the present year, 432 foreign investors have invested in Chinese bonds valued at 800 billion Yuan.

Chinese bonds are promoted by Bloomberg through two new fixed income Bloomberg Barclays indices that will be launched on the 1st of March. The forex regulator SAFE of China allows hedging against currency risk, to encourage more investors to operate the interbank market of China. China has pinned its hopes on the A-Shares hitting the global market, but the efforts are futile. So, the government has shifted its focus on promoting Chinese bonds.

In order to stabilize the forex industry, SAFE announced on Monday that forex regulations will be strengthened to reduce the capital outflow. Several underground banks were accused of using fake deals and documents to encourage capital outflow. As many as 380 underground banks were shut down last year by the Chinese police.

Due to the crackdown on forex transactions, China lost its position as the top country trading bitcoins. Three important bitcoin platforms in China were shut down, after extreme price moves happened, triggered due to the movement in bitcoins. Currently, Japan is the leader in bitcoin transactions.