China to connect interbank, exchange bond markets

China will connect its interbank and exchange bond markets, the People’s Bank of China said on Sunday, a move aimed at unifying segregated bond markets and facilitating monetary policy transmission and macro-economic management.

Qualified investors will be allowed to buy and sell bonds traded in each other’s markets via the “connect” infrastructure, the PBOC said.

The interbank bond market, which was formed in 1997 and is supervised by the central bank and dominated by banks, is much larger than the exchange bond market in terms of issuance and trading volume.

The exchange bond market is regulated by China Securities Regulatory Commission and counts investors such as brokerages, investment funds and individuals as participants. 

By end-2019, China’s total outstanding bonds reached 99.1 trillion yuan (US$143 billion).