In the commitment to further expanding the two-way opening-up of China’s financial market, the People’s Bank of China (PBC) and the State Administration of Foreign Exchange (SAFE) jointly issued the Notice of the People’s Bank of China and the State Administration of Foreign Exchange on Matters Concerning the Proceeds Management for Yuan-Denominated Bonds Issued by Overseas Issuers in China (the “Notice”). This Notice clarifies the requirements of proceeds management for yuan-denominated bonds issued by overseas institutions in China (the “Panda Bonds”), to facilitate overseas institutions’ financing activities in China’s bond market.
The Notice covers the following four major aspects. First, it unifies the rules of the interbank market and exchange-traded bond market regarding proceeds registration, account opening, transfer and use of proceeds, and statistics and monitoring of Panda Bonds. Second, it standardizes the registration and account opening procedures, requiring pre-issuance registration with banks. For Panda Bonds issued by tranches, it allows the issuer to register and open an account for the initial tranche and submit issuance information for each of the subsequent tranches using the same account. Third, it refines the management of foreign exchange risks for Panda Bonds, permitting foreign issuers to manage exchange rate risks by trading in foreign exchange derivatives with domestic financial institutions. Fourth, it specifies that the proceeds from Panda Bond issuance may either be retained in China or remitted overseas for use.
The Notice will come into effect from January 1, 2023.
