China has granted approval for HSBC, BNP Paribas, ING Bank and other foreign financial institutions to enter its domestic bond market with a value of 5.9 billion dollars.
Over the last few years, China has significantly liberalized its bond market and opened it for foreigners. According to Financial Times, the Chinese bond market is the third largest in the world after the US and Japan.
This move comes at a time when China's economic growth is slowing and falling domestic interest rates accelerate capital outflows. Economic experts argue that the market opening is necessary if China seeks to convince foreign investors to keep their investments in Chinese yuan.
China has also agreed currency swaps with a number of countries including Russia and Ukraine, which will allow the exchange of yuan to foreign currencies. This move would help China minimize exchange rate risks arising from high volatility in developing countries, the article said.
