1. What is the background of repealing the Interim Measures for the Administration of the Issuance of RMB Bonds in Hong Kong Special Administrative Region by Domestic Financial Institutions (Announcement No. 12 [2007] of PBC and NDRC, hereinafter referred to as the Interim Measures)?
In 2007, for the orderly development of RMB business in Hong Kong, with the approval of the State Council, the People’s Bank of China (PBC) and the National Development and Reform Commission (NDRC) jointly released the Interim Measures to regulate the issuance of RMB bonds in Hong Kong by domestic financial institutions. Since then, the PBC has collaborated with the NDRC to take proactive and prudent steps on relevant work. As of H1 2021, RMB bonds issued by domestic financial institutions in Hong Kong totaled RMB147.8 billion, which has played an important role in diversifying investment products in the offshore RMB market, broadening channels for the use of RMB funds overseas, and enhancing the influence of RMB.
According to the Interim Measures, any domestic financial institution that intends to issue RMB bonds in Hong Kong is required to have its eligibility and issuance amount reviewed by the PBC and the NDRC before the review results are submitted to the State Council. With the step-up in the building of a new higher-standard open economy system, the continuous improvement of China’s unified external debt management, and the gradual establishment of a sound macroprudential management framework for cross-border financing, the Interim Measures can no longer fully satisfy prevailing development needs. Against such background, to deepen the reform of “streamlining administration, delegating powers, improving regulation, and upgrading services”, further unify and standardize the management framework for bond issuance in overseas jurisdictions by domestic financial institutions, and enhance the convenience and flexibility of issuing bonds overseas, the PBC and the NDRC jointly repealed the Interim Measures upon the approval of the State Council.
2. The system governing bond issuance in overseas jurisdictions by domestic financial institutions will be further optimized after the repeal of the Interim Measures. How will the specific procedures change?
The repeal of the Interim Measures will not affect the issuance of RMB- and foreign currency-denominated bonds in Hong Kong and other countries (regions) by domestic financial institutions. In fact, the issuance procedures will become more convenient and optimized, allowing issuers to choose the issuing regions and time windows within approved quotas at their discretion. Specifically, when a financial institution applies to the PBC for issuing bonds in an overseas jurisdiction, it may calculate and submit its upper limit of risk-weighted outstanding cross-border financing in accordance with the Notice of the People’s Bank of China on Issues Concerning the Macro-prudential Management of Full-covered Cross-border Financing (Yinfa No. 9 [2017]). The PBC shall verify its RMB- and foreign currency-denominated bonds outstanding within such upper limit. Meanwhile, the financial institution is required to, before issuing bonds overseas, apply to the NDRC for registration in accordance with the Notice of the National Development and Reform Commission on Advancing the Reform of the Administration of the Registration System for External Debt Issuance by Enterprises (Fagaiwaizi No. 2044 [2015]) and other relevant regulations, and report its issuance information to the NDRC timely. In addition, the financial institution is expected to improve the efficiency of fund usage in line with the principle of “focusing on the main business, serving the real economy, and forestalling risks”.
Going forward, the PBC, the NDRC and other relevant authorities will continue to manage bond issuance in overseas jurisdictions by domestic financial institutions in a prudent and orderly manner, facilitate financial institutions in utilizing the two types of resources provided by domestic and overseas markets, and support the formation of the new development paradigm featuring dual circulation, in which domestic and overseas markets reinforce each other, with the domestic market as the mainstay .
