The Inter-Bank Bond Market in the People's Republic of China

An ASEAN+3 Bond Market Guide

• Publisher: Asian Development Bank
• Year: 2020
• ISBN:
  9789292623425
• Topic: Commerce
• Subtopic: Obligations

The ASEAN+3 Bond Market Guide series provides country-specific information on the investment climate, rules, laws, opportunities, and characteristics of local bond markets in Asia and the Pacific. It aims to help bond market issuers, investors, and financial intermediaries understand the local context and encourage greater participation in the region's rapidly developing bond markets. This edition focuses on the Inter-Bank Bond Market in the People's Republic of China, which is one of the country's most important bond markets and one of only two that are accessible to foreign investment.

II

Legal and Regulatory Framework

A. Legal Tradition

The legal structure of the PRC follows the socialist legal system with Chinese characteristics guided by the Constitution of the PRC. The current version of the constitution was adopted in 1982, with further revisions in 1988, 1993, 1999, and 2004. The constitution was last amended on 11 March 2018. The legal framework is expressed through the Civil Law, commercial laws, and other laws.

B. English Translation

Laws and regulations in the PRC are generally published in Chinese, the official national language. Official publications use the simplified Chinese character set. Simplified Chinese characters, known as jiǎnhuàzì (简化字), are standardized Chinese characters prescribed in the Table of General Standard Chinese Characters for use in the PRC. Along with traditional Chinese characters, they are one of the two standard character sets of the contemporary Chinese written language. The Government of the PRC has promoted them for use in printing since the 1950s to encourage literacy. They are officially used in the PRC and Singapore.

In addition, the State Council, relevant ministries, stock exchanges, SROs, and market institutions may provide official or unofficial English translations of the laws, regulations, and directives for which they are responsible. For example, NAFMII carries on its website a selection of the relevant laws and regulations for the CIBM and selected self-regulatory rules and guidelines in English.⁸ CFETS also carries on its website a selection of relevant regulations, market rules, and guidelines for the CIBM in English.⁹

Some market institutions provide unofficial English translations of the laws, regulations, and directives under their own purview. These English translations are typically available from an institution’s websites, market observers, or the law departments of universities.¹⁰

The English version of the PBOC website contains a list of selected laws and regulations related to the CIBM and other market segments, which are available for viewing or download.¹¹ Laws and regulations on securities and derivatives—including state laws, administrative laws, judicial interpretations, State Council department rules, and the rules of SROs—are available from the CSRC website, if only in Chinese.¹² CSRC has an English website. Hence, some English translations of laws and regulations, in particular those pertaining to the QFII and RQFII regimes, may be available from this site. At the same time, the CSRC website does not contain rules and regulations related to the CIBM. Otherwise, English translations of laws and regulations may be available from other official or private institutions.

While there may be no specific mention on these websites, only the versions of laws, regulations, and other regulatory instruments issued in Chinese are relied upon for matters before the courts. At the same time, translations of laws, regulations, and rules may result in the use of different terminology in English from what was intended in the original Chinese version. This has been observed, particularly when it comes to the description of rules and regulations. As a result, this bond market guide also includes the title of institutions and major laws and regulations in Chinese characters to aid the reader in ensuring that the correct description of the institutions, laws, or regulations in question is provided.

Please also refer to Chapter III.H for additional information on this topic in the context of debt financing instrument issuance documentation and Appendix 5 for a list of Chinese technical terms and their interpretations in English.

C. Legislative Structure

The legal framework of the China bond market consists of laws, administrative regulations, department rules, business rules, and business agreements (Table 2.1). This structure applies to all bond market segments, including the Inter-Bank Bond Market.

Table 2.1: Bond Market Legislative Structure in the People’s Republic of China

Legislative Structure
First tier	Constitution
Second tier	Laws (prepared by the NPC or the NPC Standing Committee, with supreme legal force)
Third tier	Administrative regulations (issued by the State Council); Local rules, local opinions (promulgated by local governments)
Fourth tier	Departmental rules (prepared by departments of the State Council, inclusive of bond market supervisory organization[s])
Fifth tier	Self-regulatory rules, industry provisions, business rules, and guidelines (issued by NAFMII and bond market infrastructure institutions such as CCDC and SHCH)
Sixth tier	Business agreements (service agreements signed by and between the bond market infrastructure institutions and customers)

CCDC = China Central Depository & Clearing Co., Ltd.; NAFMII = National Association of Financial Market Institutional Investors; NPC = National People’s Congress; SHCH = Shanghai Clearing House.

Source: ASEAN+3 Bond Market Forum Sub-Forum 1 team based on CCDC. 2016. China Bond Market Overview 2015. Beijing.

Key legislation is the summary term for those laws aimed at a particular market such as the securities market or capital market. These laws establish and govern securities markets or market segments, including the bond market, its institutions, members, and participants. Laws are prepared by the National People’s Congress (NPC) or its Standing Committee; the laws on the bond market regulate and ensure the effective operation of the market.

Administrative regulations are issued by the State Council and contain market management rules. Administrative rules also include local rules promulgated by local governments, as may be applicable, and cover administrative measures on products, market participants, and other market features.

Departmental rules are categorized as administrative rules and promulgated by the ministries and commissions under the State Council, PBOC, and other departments with administrative responsibilities directly under the State Council, including the bond market regulator(s).

Self-regulatory rules are set by SROs such as NAFMII. Industry provisions and business rules are issued by bond market infrastructure or market institutions such as CCDC, CFETS, and SHCH.

Business agreements are the service agreements signed by and between the bond market infrastructure institutions and their customers or account holders.

In practice, market laws and regulations are the general terms used when referring to laws, administrative regulations, and department rules. Table 2.2 provides significant examples in each of the respective legislative tiers.

Table 2.2: Examples of China Inter-Bank Bond Market Legislation by Legislative Tier

Legislative Tier	Content or Significant Examples
Constitution of the People’s Republic of China	Principles, Rights, and Obligations
Laws (key legislation)	• Law of the People's Republic of China on the People’s Bank of China, 2003 • Law of the People’s Republic of China on Banking and Supervision, 2004 • Law of the People’s Republic of China on Funds for Investment in Securities, 2009 • Company Law of the People's Republic of China, 2013 • Securities Law of the People's Republic of China, 2014
Administrative regulations	• Administrative Measures for Debt Financing Instruments of Non-Financial Enterprises in the Inter-Bank Bond Market, 2008, No.1 PBOC (银行间债券市场非金融企业债务融资工具管理办法) • Administrative Measures for the Registration, Depository and Settlement of Bonds in the Inter-Bank Bond Market, 2009, No. 1 PBOC (银行间债券市场债券登记托管结算管理办法) • Regulations on the Administration of Enterprise Bonds, 2011 Revision • Interim Regulation on Enterprise Information Disclosure, 2014 • Guidelines for Book Building in Issuance of Enterprise Bonds (Interim), 2014 • Interim...