Circular on Matters Relevant to Further Facilitating Investment in the Interbank Bond Market by Foreign Institutional Investors

(Issued by the People's Bank of China and State Administration of Foreign Exchange on September 30, 2019 and effective as of November 15, 2019.)

Pursuant to relevant provisions such as the PRC Regulations for the Control of Foreign Exchange and the People's Bank of China, Announcement [2013] No.8, we hereby notify you on matters relevant to further facilitating investment in the domestic interbank bond market by foreign institutional investors as follows:

1 . A foreign institutional investor may, as required for its own investment management, carry out bi-directional non-transaction transfer of the interbank bond market bonds held in its qualified foreign institutional investor (QFII) or renminbi qualified foreign institutional investor (RQFII) (hereinafter collectively referred to as the "QFII/RQFII") bond account and interbank bond market Direct Investment (Direct Investment) bond account.

(1)       A foreign institutional investor shall submit an application for non-transaction transfer of title to the interbank bond market bonds that it holds to the China Central Depository & Clearing Co., Ltd. or Shanghai Clearing House (hereinafter collectively referred to as the "Bond Depository") through its QFII/RQFII domestic custodian or Direct Investment clearing agent.

For the application materials to be submitted and the specific operation procedure to be complied with for a non-transaction transfer of title, the business guidelines issued by the Bond Depository shall apply.

(2)       Once the non-transaction transfer of title between the QFII/RQFII and the Direct Investment channels is completed, the relevant administration requirements of the subsequent channel shall be complied with for subsequent trading and fund conversion, etc.

(3)       The Bond Depository shall regularly report on non-transaction transfers of title to the People's Bank of China.

2 . The funds in a foreign institutional investor's QFII/RQFII custodial account and Direct Investment fund account may be directly transferred bi-directionally in China.

(1)       A foreign institutional investor shall submit its application for a transfer of funds from its QFII/RQFII custody account to its Direct Investment fund account to its QFII/RQFII domestic custodian; or its application for a transfer of funds from its Direct Investment fund account to its QFII/RQFII custody account to its Direct Investment clearing agent.

(2)       Once the transfer of funds between the QFII/RQFII and the Direct Investment channels is completed, the relevant administration requirements of the subsequent channel shall be complied with for subsequent trading and fund conversion, etc.

3 . Domestic custodians and clearing agents shall, according to their own duties, duly perform the services, data submission and monitoring work relating to non-transaction transfers of title to bonds and fund transfers for foreign institutional investors in accordance herewith.

A domestic custodian or a clearing agent shall submit information on the fund transfers of foreign institutional investors to the renminbi cross-border receipt and payment information management system in accordance with relevant provisios such as the Measures for the Administration of the Renminbi Cross-Border Receipt and Payment Information Management System (issued with document Yin Fa [2017] No.126), the General Office of the People's Bank of China, Circular on Improving the Procedure for the Submission of Interbank Transaction Data to the Renminbi Cross-Border Receipt and Payment Information Management System (Yin Ban Fa [2017] No.118).

4 . Where a foreign institutional investor invests in the domestic interbank bond market through both the QFII/RQFII and Direct Investment channels, it is required to carry out record filing with the Shanghai head office of the People's Bank of China only once, either through its QFII/RQFII domestic custodian or its Direct Investment clearing agent.

5 . The non-transaction transfers of title to bonds and domestic fund transfers between QFII/RQFII and Direct Investment channels by foreign central banks, international financial organizations and sovereign wealth funds shall be handled with reference to this Circular.

6 . If a foreign institutional investor wishes to open an account in the name of the products under its management, those products shall be the same type of products without legal personality.

7 . This Circular shall be effective as of November 15, 2019. In the case of a discrepancy between relevant existing provisions and this Circular, this Circular shall prevail.