Central Huijin to trade on interbank bond market

The People's Bank of China on Monday licensed Central Huijin Investment Ltd, through which Beijing controls State-owned banks, to trade on the interbank bond market.

Analysts believe the move marks Beijing's latest step to support Chinese lenders, which are about to engage in stronger competition brought about by the central bank’s interest rate liberalization moves.

The collective account balance of the interbank bond market reached 25.7 billion yuan ($4.2 trillion) at the end of October. That is around five times as much as five years earlier.

If necessary, Central Huijin can buy banks’ subordinated bonds through the market, which could be written down if the lenders show a loss on their balance sheets.

Central Huijin was founded to create an organizational structure so Beijing can operate as a shareholder for the large “big four” State-owned banks, to improve corporate governance and initiate reforms in the banking sector.