(Yicai Global) Jan. 18 -- China's central bank plans to further open the country's bond markets to foreign investors and work harder to improve the policies and systems it has in place for overseas traders.

The People's Bank of China will develop exchange-traded funds for bonds and push forward with the interconnection of the bond central depository authority, Deputy Governor Pan Gongsheng said at the China International Bond Investment Forum in Beijing yesterday. The PBOC has already reached an agreement with the China Securities Regulatory Commission on this matter, he added.

There was a net inflow of foreign capital into China's bond market worth about USD100 billion last year, making up 80 percent of the net volume heading into emerging markets, Pan added, saying some 1,186 overseas institutions held Chinese bonds worth CNY1.73 trillion (USD256 billion) at the end of 2018.

Foreign investors mostly focus on treasury bonds, policy financial bonds and other fixed-interest products in the inter-bank bond market, he continued, saying there is still space among high-grade corporate credit and asset-backed bonds for them to buy into.

Overseas traders do harbor concerns for China's bond market, but regulators are working on a special settlement cycle to meet the needs of foreign investors, he added, saying preparations for infrastructure are pretty much ready.

The State Administration of Foreign Exchange is looking into procedures for foreign investors to participate in forex hedging transactions and the Ministry of Finance will increase the number of bond issuances in key periods this year to meet investor demand in the allocation of government bonds, Pan said. The PBOC will also grant investors full access to repurchases and promote the development of the yuan derivatives market.

Editor: James Boynton