Central Bank: Investing in the bond market through counter channels can efficiently convert savings into bond investments, increasing residents' property income.

On February 29, the relevant person in charge of the People's Bank of China answered questions from reporters regarding the "Notice on Matters Concerning Interbank Bond Market Counter Business." The relevant person from the People's Bank of China stated that currently, the scale of government bonds held directly by residents in our country is relatively small, and there is still considerable room for improvement compared to mature bond markets. By investing in the bond market through counter channels, savings can be efficiently converted into bond investments, increasing residents' property income. Original text: The relevant person in charge of the People's Bank of China answers questions from reporters about the "Notice on Matters Concerning Interbank Bond Market Counter Business." Recently, the People's Bank of China issued the "Notice on Matters Concerning Interbank Bond Market Counter Business" (hereinafter referred to as the "Notice"), which will be implemented from May 1, 2024. The relevant person in charge of the People's Bank of China answered questions from reporters on related issues. Q: Please briefly introduce the background and considerations of the "Notice." A: Bonds are fixed-income products. Government bonds have both asset security and liquidity, and investment returns have certain advantages over deposits. Since 2002, in order to increase the channels for individuals and enterprises to purchase national bonds, the People's Bank of China, together with relevant departments, has issued rules for the management of counter bond business and gradually expanded the range of bond types. Counter bonds have become an important mechanism for broadening residents' investment channels and an important part of our country's multi-level bond market. The Central Financial Work Conference proposed to do well in inclusive finance and promote the high-quality development of the bond market. To implement the spirit of the conference, the People's Bank of China issued the "Notice" to further expand the types of counter bond investments, optimize relevant mechanism arrangements, facilitate residents and other institutional investors' bond investments, increase residents' property income, and accelerate the development of the multi-level bond market. Q: In comparison with the No. 2 Announcement of 2016, what specific content has the "Notice" further clarified? A: Firstly, it clarifies the types and trading methods of counter business. Various types of bonds traded in the interbank bond market can be traded through counter investment transactions in compliance with the suitability requirements of investors. Secondly, it optimizes the management rules for investor account opening. Investors who have opened accounts in the interbank bond market are allowed to open bond accounts at the counter business opening institutions. Thirdly, overseas investors can invest through the counter channel. Overseas investors approved to enter the interbank bond market can open bond accounts through counter business opening institutions and domestic custody banks. Q: How can investors trade in national bonds and local government bonds through the counter investment? A: Currently, there are 30 commercial banks nationwide that have opened counter bond business. Investors can apply to open counter bond accounts through the business outlets or electronic channels of counter business opening institutions. Counter business opening institutions provide services such as bond quotation trading, registration and custody, settlement and clearing, and bond inquiries. Counter business opening institutions mainly provide counter bond services for individuals and businesses, focusing on national bonds, local government bonds, and policy financial bonds. Q: What significance does counter bond business have in promoting the high-quality development of the bond market? A: Firstly, it is conducive to broadening residents' investment channels. Currently, the scale of government bonds directly held by residents in our country is relatively small, and there is still considerable room for improvement compared to mature bond markets. By investing in the bond market through counter channels, savings can be efficiently converted into bond investments, increasing residents' property income. Secondly, it is conducive to optimizing the financing structure. As of the end of 2023, the balance of the bond market in our country was 158 trillion yuan, making it the world's second-largest bond market. Accelerating the development of counter bond business is conducive to promoting the development of direct financing and optimizing the structure of the financial system. Thirdly, it is conducive to the development of a multi-level bond market. Counter bond business is an extension of the interbank bond market to retail finance and inclusive finance. Compared with centralized and unified financial infrastructure, counter opening institutions can provide various flexible and diversified comprehensive services such as bond custody, market making, collateral management, and integrated clearing and settlement for various types of investors, enhance market activity, and promote market stratification. Q: What are the investor suitability management and risk prevention measures for counter business? A: Counter business opening institutions should do four aspects of work well: firstly, establish an investor suitability management system, understand investors' risk identification and tolerance, and provide appropriate bond variety sales and trading services to investors with corresponding capabilities. Secondly, fully disclose the risks of products or services and not induce investors to invest in bond varieties and trading varieties that are not compatible with their risk tolerance. Thirdly, strengthen internal control management and system construction of counter business, strictly regulate the operation processes of counter bond trading circulation, custody settlement, information security, etc. Fourthly, clarify the risk rights and responsibilities between institutions and investors and improve dispute resolution mechanisms. This article is selected from the official website of the "People's Bank of China", edited by GMTEight: Yang Wanlin.