China has relaxed rules for some long-term foreign investors in its interbank market by removing the limits on the sizes of investment, a move that could deepen the nascent Chinese financial market.
But some investors warned it may be some time yet before the measure, which came less than a week after China intervened heavily in its stock market to prevent a meltdown, takes effect and increases investment opportunities.
Foreign central banks, financial institutions and sovereign wealth funds that are approved investors in the interbank market can now buy or sell bonds, bond forwards, interest rate swaps and conduct bond repurchases, the central bank said. The rules are effective from Tuesday.
These foreign investors "should be long-term investors" and can decide for themselves how much to invest, the People's Bank of China said in a statement on its website.
"This is mainly about removing limits on sizes of investment for these foreign investors," said a bond trader in Shanghai and who declined to be identified as he was not authorized to speak to the media.
Given that trades done by foreign investors require counterparties, some of which face restrictions on the sizes of their investments, a banker at a midsized Chinese bank said it could be a long time yet before the market is actually freed up.
Granting foreign investors greater access to China's capital markets is a long-running theme in the country's quest to reform its economy and turn into one more reliant on free markets, and less dependent on central planning.
Sources told Reuters in March that China was set to relax its rules for trading by foreigners in its Shanghai-based interbank market, by making it simpler for them to get quotas for their investments.
But China's reform credentials have suffered after the government waded into the stock market last week to support share prices with strong-arm tactics, including telling brokerages to buy stocks and barring some firms from selling their shares.
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