July 3, 2018 / 8:48 AM / 5 months ago

China to simplify Panda bond rules to boost issuance

HONG KONG, July 3 (Reuters) - China will soon introduce clear guidelines for Panda bonds, a senior central bank official said Tuesday, in a move to boost the use of the yuan asset and encourage greater foreign participation in the country’s bond market.

Pan Gongsheng, deputy governor of the People’s Bank of China, said that the new guidelines will simplify onshore issuance by offshore institutions and allow offshore issuers more flexibility in using the issuance proceeds onshore or offshore.

Panda bonds, yuan-denominated debt issued by foreign borrowers, make up a small fraction of China’s $11 trillion dollar onshore bond market. Foreign entities have issued Panda bonds worth more than 160 billion yuan ($24 billion) on the interbank market as of the end of May, Pan said.

Pan was speaking at an event in Hong Kong to mark the first anniversary of the Bond Connect programme that links China’s onshore bond market with offshore investors.

Interest in Panda bonds has remained limited in part because of unclear rules over issuer qualification and the movement of proceeds.

Pan also said issues standing in the way of wider Bond Connect adoption, including questions about the taxation of offshore investments in onshore bonds, would be clarified soon.

$1 = 6.6627 Chinese yuan Reporting by Alison Lui, Additional reporting by Andrew Galbraith in SHANGHAI Editing by Jacqueline Wong

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