News&Information

April 05, 2017

Shanghai FTZ to support "Belt and Road" initiative through bond offering

The China (Shanghai) Pilot Free Trade Zone (FTZ) will strive to become an investment and financing hub for the country's "Belt and Road" initiative, encouraging the offer of onshore bond insurance to attract investors, the city's financial officials said today during a media briefing on the new reform plan of the zone.

"Shanghai FTZ plans to attract sovereign funds from countries along the Belt and Road regions to invest in onshore yuan-denominated assets," said Li Jun, vice director of the Shanghai Financial Service Office. "It supports qualified foreign companies to develop and expand its business by making use of China's capital market."

The State Council issued a new reform plan of the three-year-old Shanghai FTZ yesterday, with highlights of the launch of a new free trade port inside the zone, attracting foreign investors to issue yuan-denominated financial products, and serve projects in the "Belt and Road" initiative.

Li said the offer of onshore bond insurance is one of the major practices to push forward the reform at present.

"The Belt and Road initiative is an important carrier for financial reforms in the FTZ. It offers a possible extension of products to push forward yuan's internationalization," Li said. "This is where Shanghai's strength lies in."

Russian aluminum giant UC Rusal issued 1 billion yuan (US$145.3 million) worth of seven-year yuan-denominated onshore bonds to fund equipment purchased in China last week, becoming the first foreign company set to offer so-called "panda bonds" on Shanghai's stock exchange, Li said.

A total of another 9 billion yuan worth of bonds will be issued afterwards in Shanghai, he added.

Besides, Shanghai FTZ will encourage Shanghai-based insurers to offer financial products such as construction insurance, life insurance and cargo insurance to provide risk protection services for key projects alongside the Belt and Road, according to Li.

Li told Shanghai Daily that Shanghai FTZ will also participate in the country's plan to launch a bond connect allowing easier access for foreign investors to trade onshore bonds, but he didn't elaborate details on the process of the preparation.

As part of the efforts to open Chinese debt market to foreign investors, China plans to introduce a bond trading link between Hong Kong and the mainland bourses by year-end, premier Li Keqiang said in an annual media conference in March.