SBP to invest in Chinese bonds

Chinese, Pakistan central banks sign deal for investment in Beijing’s debt market.

BEIJING: Pakistan will join a growing list of central banks that will invest in China’s interbank market as the world’s second-largest economy opens its capital markets.

The People’s Bank of China announced on Monday that it had signed an agreement with the State Bank of Pakistan to help Pakistan invest in its local debt market, without providing details about the size of the investment programme.

China has allowed foreign central banks to invest in its domestic interbank bond market since 2010 as part of efforts to widen investment avenues for foreign yuan asset holders and promote the international use of the Chinese currency.

China and Pakistan signed a three-year currency swap deal worth 10 billion yuan ($1.60 billion) in December 2011 and companies in the two countries are encouraged to accept export and import bills in Chinese yuan.

The central banks of Japan, South Korea, Singapore, Thailand, Hong Kong and Indonesia were among those who invest in China’s bonds onshore.

Besides central banks, China also allows yuan clearing banks in Hong Kong and Macau and foreign banks that help settle cross-border trade in yuan to invest in its interbank bond markets.

Published in The Express Tribune, October 23^rd, 2012.