China Regulatory Brief: Liberalization of Domestic Bond Market, China-South Korea FTA

June 8, 2015 Posted by China Briefing Reading Time: 4 minutes

China Opens Up Domestic Bond Market

On May 28, the People’s Bank of China (PBoC) released a circular which allows overseas banks to borrow RMB funds through buy backs for use overseas. Further, certain settlement banks and participating banks that have been approved by Chinese authorities may carry out bond buy back transactions. China has recently approved 32 foreign institutions including HSBC and Morgan Stanley to invest in its US$5.9 trillion domestic bond market. China has the world third-largest domestic bond market, behind the U.S. and Japan. However, the country has put severe restrictions on investment into its domestic bond market. The recent move is considered to be a big step towards the liberalization of its domestic bond market and opening up of its capital markets to foreign investment.

Shanghai FTZ Lifts Restrictions on Value-added Telecommunications Services

On May 29, China’s Ministry of Industry and Information Technology (MIIT) announced its decision to further lift the restrictions on providing value-added telecommunications services in the Shanghai Free Trade Zone (FTZ). Specifically, the facilities used for providing call center services and domestic internet protocol virtual private network services (VPN) may be installed within the Shanghai city. Meanwhile, relevant service providers are allowed to set up content delivery networks (CDN) nationwide for immediate speed improvements to their own websites. Previously, investors providing value-added telecom services were only allowed to set up their service facilities within the Shanghai FTZ.

In China, telecom services are classified into two categories: value-added telecom services (VATS) and basic telecom services. Basic telecom services are services like fixed and mobile telephone, wireless internet, mobile internet etc. Value-added telecom services are ones that use basic telecom networks to provide services.

China and South Korea Sign Free Trade Agreement

On June 1, China and South Korea signed the much anticipated Free Trade Agreement (FTA), after three year’s of previous negotiations. It was announced that the deal would eliminate tariffs on 90 percent of the goods traded between China and South Korea. China is now South Korea’s largest trading partner. With a uniform and consolidated free trade agreement (FTA), both China and South Korea would benefit significantly. The economic bounties include reduced tariffs and barriers in the domains of trading hi-tech goods and services, investment, and rules of origin for imports. The FTA is expected to come into force later this year. China is also looking to finalize a trilateral FTA with Japan and South Korea.

China to Implement Unified Social Credit Code for Enterprises

On June 4, Chinese Premier Li Keqiang announced the decision to implement the unified social credit code system for enterprises during an executive meeting of the State Council. Specifically, enterprises will receive a unified code and registration certificate upon incorporation. The social credit code will be treated as an ID card of sorts for the company. Meanwhile, China launched an official credit information platform for market players, which enables the public to view the enterprises’ credit information easily. All the enterprises are required to switch to the new code and registration certificate by the end of 2017.

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