The Chinese onshore bond market and why you should care about it

The Chinese onshore bond market and why you should care about it

Why is the Chinese onshore bond market important and what differentiates Chinese and international bond markets?

Original news

Report on Chinese and international primary debt capital markets 

The first report of the ICMA/NAFMII Working Group, consisting of the International Capital Market Association (ICMA) and National Association of Financial Market Institutional Investors (NAFMII), aims to give policymakers and market practitioners a useful outline of the way in which bonds are sold through the primary capital markets in both the cross-border international debt market and the onshore Chinese interbank bond market.

What is the report about?

The report compares practices and procedures in the international investment grade public bond markets with those in the Chinese onshore interbank bond market and focusses on three key aspects of bond offerings:

  • due diligence—the process of identifying, processing and validating the information about the issuer which is provided to prospective investors to enable them to make an informed decision whether or not to invest in the bonds
  • disclosure—the overall composition of the information which issuers are required to provide to prospective investors (a description of the issuer and its business and the market in which it operates, based on the information gathered in the due diligence process, together with other information such as a the terms and conditions of the bonds and risk factors), and
  • bookbuilding—the process by which bond underwriters assess market demand for the bonds and fix the price at which they will be offered

Why is the Chinese onshore interbank bond market important?

The Chinese onshore bond market is now the third largest in the world, with total bonds outstanding of about $4.7trn at March 2015 according to figures published by the Bank of International Settlements. The interbank bond market represents more than 90% of the total Chinese onshore bond market.

Access by foreign investors to the Chinese bond market is restricted but being eased progressively as part of China’s push to promote the yuan as a reserve currency and have it included in the International Monetary Fund

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About the author:
Before joining LexisNexis Tony was a partner for many years in the financial markets department of Simmons & Simmons, where he covered structured products, derivatives, debt capital markets, structured trade finance, emerging markets and many other types of financial transactions. He has extensive experience of transactions in Russia, Spain and Latin America and a number of other jurisdictions.