The People's Bank of China ("PBC") and the State Administration of Foreign Exchange ("SAFE") have recently issued the Circular on Matters Concerning Further Facilitation of Investment of Foreign Institutional Investors in the Interbank Bond Market (the "Circular").
Highlights of the Circular touch upon three aspects as below. First, a foreign institutional investor may transfer, for non-transactional purposes, the bonds circulated in the interbank bond market, that are held in its bond account under the qualified foreign institutional investor (QFII) or Renminbi qualified institutional investor (RQFII) mechanism, to its bond account for direct investment in the interbank bond market, and vice versa. Second, funds in the QFII/RQFII escrow account of a foreign institutional investor may be transferred, in the Chinese mainland, directly from or to its capital account for direct investment. Third, in case a foreign institutional investor intends to invest in the domestic interbank bond market both under the QFII/RQFII mechanism and through direct investment, it only has to file a record with the PBC's Shanghai Head Office once, either through its QFII/RQFII custodian bank in China or its clearing agent for direct investment.