First Batch of Foreign Banks Allowed to Invest in China’s Interbank Foreign Exchange Market
According to the country’s central bank the first batch if foreign central banks, international financial institutions and sovereign wealth funds are registered to enter the interbank foreign exchange market in China. The registration came ahead after a highly anticipated announcement of the International Monetary Fund that the Chinese yuan will be joining the foreign exchange basket placing the yuan in par with the U.S. dollar, British pound, Euro and Japanese yen in the Special Drawing Rights Basket.
Seven institutions are registered this including three central banks namely the Reserve Bank of Australia, the National Bank of Hungary and the Hong Kong Monetary Authority. The International Bank for Reconstruction and Development, the Trust Funds of World Bank Group, the International Development Association, and Government of Singapore Investment Corp. are the other institutions that are admitted in the domestic market. Furthermore the People’s Bank of China said that these institutions are allowed to trade spot products, swaps, forwards, currency swaps and options in the domestic foreign exchange market.
China will be issuing a detailed rules that will allow foreigners to participate in interbank foreign exchange market, this following the central bank’s decision in July to permit long term foreign investors in trading in the interbank market and removing the limits on the size of investments being made. This will grant foreign investors greater access to capital markets in the long run as China is looking into reforming its economy and turning it into a more reliant free market and to be less dependent on central planning.