China has taken another step toward deepening financial market openness by allowing a wider range of foreign institutional investors to participate in bond repurchase (repo) transactions in the domestic interbank bond market. A joint announcement released by the People’s Bank of China (PBOC), the China Securities Regulatory Commission (CSRC), and the State Administration of Foreign Exchange (SAFE) introduces a more market-aligned framework for bond repo operations and harmonizes domestic practice with international standards.
A Response to Growing Foreign Participation
Foreign demand for Chinese fixed-income assets has risen steadily in recent years. As of August 2025, 1,170 overseas institutions from 80 countries and regions held approximately RMB 4 trillion of Chinese bonds. Inclusion of Chinese sovereign and policy bank bonds in major global indices such as Bloomberg Barclays, JPMorgan, and FTSE Russell has accelerated inflows and increased international engagement.
Alongside higher bond holdings comes the need for liquidity tools. Repo transactions, critical for cash management, collateral optimization, and secondary market activity, have long been available in China, but access for foreign participants has been limited and operational models differed from international norms. The latest policy aims to remove such frictions.
Expanded Eligibility Across Investor Types
Under the new rules, all foreign institutional investors that enter the bond market via direct access or Bond Connect will now be permitted to conduct repo transactions. This includes overseas central banks, sovereign wealth funds, multilateral financial institutions, commercial banks, insurers, securities firms, fund managers, futures brokerages, trust companies, and long-term investors such as pension and charitable funds. Supporting infrastructure providers, including overseas industry associations and self-regulatory bodies, may also participate, provided they file standardized master agreements with the PBOC.
Alignment with Global Market Practices
Historically, Chinese repo transactions operated on a “pledged” model, where securities remain with the seller and are merely frozen rather than transferred. International repo markets typically adopt a “transfer-of-title” approach, which clearly defines rights, facilitates default management, and enhances collateral mobility.
The new framework enables foreign investors to use the transfer-based model widely recognized globally. Institutions already conducting repos under the older structure will be granted a 12-month transition period to migrate operations as needed.
Risk Management and Market Safeguards
Regulators emphasize that openness will be balanced with prudential oversight. Repo transactions conducted through Bond Connect will initially be limited to trading with qualified market makers selected from primary dealers demonstrating strong performance. Transaction flows will be subject to closed-loop fund management, real-time data reporting, and supervisory monitoring.
In addition, financing quotas will fall under the existing cross-border RMB interbank financing framework. Repo activity will be subject to leverage constraints mirroring those applied to domestic buyout repo transactions.
Fund Settlement and Compliance
Settlement of repo cash flows must comply with existing regulations governing foreign investor participation in China’s bond market, including the 2020 and 2022 joint announcements by the PBOC, SAFE, and CSRC. Fund collection, payment, and account usage will continue to follow the rules applicable to the respective investment access channels.
A Step Toward a More Integrated Bond Market
By standardizing repo mechanisms for foreign investors and moving closer to international conventions, China is signaling continued commitment to financial opening — but on clearly defined and controllable terms. The move is likely to support greater secondary market liquidity and improve capital efficiency for offshore participants, further strengthening the appeal of renminbi assets in global portfolios.