China to Lift Administrative Control on Interbank Market Products

China will remove its administrative approval system for new products traded on the interbank market and only require them to be registered with the newly formed National Association of Financial Market Institutional Investors, the central bank said.

Zhou Xiaochuan, governor of the People's Bank of China, said that China will encourage the innovation of financial products developed by members of the interbank market by no longer requiring them to seek approval from the government before the products are introduced to the market.

'The new products will only need to register with the industrial association. They will still need to be filed with the regulator, but not for administrative approval,' Zhou told the inaugural meeting of the financial association, China's first industrial association for the interbank market.

Outstanding value of bonds on the interbank market, including treasury bills, central bank papers, financial debentures, corporate bonds, asset backed securities, among others, stood at 10.48 trln yuan at the end of August, 25 times the volume at the end of 1997, the year the market was formed, according to Zhou.

The market's membership has also expanded from commercial banks to all institutional investors. The latest count stood at 7,137, Zhou said.

Zhou also noted that the development of the bond market is lagging that of the stock market.

'Due to various reasons, we have paid more attention to the management of liquidity on the interbank market than on the aspects of financing, value-discovery, and risk management,' Zhou said.

'Now with the establishment of the association we hope these market functions could be improved,' he added.