The week in renminbi: Foreign investment law passes to allow greater market access, China and US snipe at each other’s human rights, Chinese onshore bond yields to tumble further

In this round-up China’s new Foreign Investment Law is tipped to spark a wave of capital inflows, the US and China attack each other’s human rights records, Bank of China (BOC) expects onshore bond yields to fall but offshore ones to stabilise

  • By Rebecca Feng
  • 20 Mar 2019
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Following the conclusion of China’s annual Two Sessions meeting on Friday, premier Li Keqiang said that the country’s foreign investment law, a set of rules intended to allow international investors similar access to Chinese markets as domestic buyers, will apply to investors from Hong Kong, Macau, and Taiwan as well.

The new rules cut the number of industries where foreign investment is banned to 48. Still proscribed are sectors such as gene research while others retain a partial ban, like oil and gas exploitation. There had been 63 industries on the list in 2018 and 180 the year before.

Law firm, Linklaters, estimates that a total of $1.5tr of foreign investment will flow into China over the next 10 years as a result of the new law.

There was a last minute change to the law before it went to a final vote on Friday. Regulators added a clause forbidding officials from divulging corporate secrets and promises criminal prosecution if they do so, according to the final version of the law.

These changes were China’s attempt to address one of the key complaints from the US in trade negotiations, the Wall Street Journal said.

Li also promised to cut funding costs for small and micro enterprises by one percentage point this year but did not elaborate on how exactly it would be done.

“[This] could potentially at least be partially achieved by giving an administrative order to commercial banks,” Yu Song, economist at Beijing Gao Hua Securities, wrote in a note published on Saturday. “This would represent a cut in profit margins for commercial banks all else [being] equal.”

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Although the US and China might have found some form of compromise on foreign investment, they went toe-to-toe last week over human rights. The US State Department published an annual report on China’s human rights status on March 13. A day later, China’s Information Office of the State Council published an English-language report titled Human Rights Record of the United States in 2018 on March 14.

“If one takes a glimpse into the human rights situation of the United States in 2018, it will not be difficult to find that the United States government, a self-styled ‘human rights defender,’ has a human rights record which is flawed and lacklustre, and the double standards of human rights it pursues are obvious,” the report said.

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Bank of China (BOC) released its Credits Investment and Financing Environment Difference Index (CIFED) for February on March 15. The index tracks the difference in yields between offshore and onshore renminbi bonds. A positive number indicates that onshore yields are higher.

The general index was still negative in February but has reversed its declining trend. By the end of February, the general index stood at minus 35.2, a 34.1 point increase from January.

The sub-index for financial industries increased 26.8 points to 60.5, making it the highest sub-index. The commercial banks sub-index increased 25.6 points to 20.1, the first positive reading in months. Meanwhile, the real estate sub-index saw an 84.6 point increase, the sharpest increase in all sub-indices.  

Looking ahead, BOC said that onshore bond yields still had space for further declines while offshore renminbi bond yields would likely remain stable.

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The usage of foreign investment in the first two months of the year totalled Rmb147.1bn ($21.7bn), a 5.5% increase YoY, according to data released by the Chinese Ministry of Commerce on Saturday. In February alone, usage of foreign investment totalled Rmb62.9bn, a 6.6% increase YoY.

Investment from the US rose 44.3% but Dutch investment grew the quickest, rising 174.8% in February.

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Chinese president Xi Jinping will pay state visits to Italy, Monaco, and France from Thursday until next Tuesday, state media Xinhua reported.


  • By Rebecca Feng
  • 20 Mar 2019

GlobalRMB Panda Bonds league table

Rank Arranger Share % by Volume
1 Bank of China (BOC) 23.98
2 China Merchants Securities Co 16.10
3 Industrial and Commercial Bank of China (ICBC) 13.41
4 Agricultural Bank of China (ABC) 9.76
5 China Securities 8.13

Panda Bond Database

Pricing Date Issuer Country Size Rmb (m)
1 30-May-19 Portugal Portugal 2,000
2 17-May-19 Trafigura The Netherlands 540
3 16-May-19 CITIC Pacific China 1,000
4 15-May-19 Republic of the Philippines Philippines 2,500
5 29-Apr-19 Semiconductor Manufacturing International Corp (SMIC) China 1,000

Offshore RMB Bond Top Bookrunners

Rank Bookrunner Share % by Volume
1 Standard Chartered Bank 25.05
2 Credit Agricole 7.04
2 HSBC 7.04
4 Bank of China (Hong Kong) (BOCHK) 6.90
4 Bank of Communications Hong Kong Branch (BOCOM HK) 6.90

Latest Offshore RMB Bonds

Pricing Date Issuer Country Size Rmb (m)
1 22-May-19 Agricultural Development Bank of China (ADBC) China 3,000
2 16-Apr-19 ICBC Singapore Branch China 1,000
3 10-Apr-19 Bank of China Macau Branch (BOC Macau) China 4,500
4 15-Mar-19 Bank of Communications Hong Kong Branch (BOCOM HK) China 2,500
5 13-Mar-19 Daimler International Finance Germany 1,000