In order to broaden the scale of bond issuance and to develop the use of certain bonds in financing debts, the China Securities Regulatory Commission (CSRC) and the China Bank Regulatory Commission (CBRC) lifted a thirteen-year ban that prohibited commercial banks from participating in bond trading on stock exchanges. This development was made through the Circular on the Pilot Program for Listed Commercial Banks Participating in Bond Trading on Stock Exchanges, which the CSRC and the CBRC jointly issued on January 19, 2008.  

The Circular provides that a commercial bank, which has already been listed on a stock exchange, may trade bonds on the fixed-income platform of the Shanghai Stock Exchange or the Shenzhen Stock Exchange (collectively, the Stock Exchanges) upon the approval of the CBRC. During the pilot period, the listed commercial banks may engage in treasury bonds, enterprise bonds and corporate bonds, as well as other types of bonds permitted by the relevant authorities. The Circular also stipulates that these listed commercial banks may only trade through a designated seat assigned by the Stock Exchanges to each bank. Furthermore, such a commercial bank may only use its own bank account to engage in bond trading.  

The CBRC and the CSRC will establish a joint supervision system to oversee the commercial banks’ bond trading on the Stock Exchanges. After gaining experience from the pilot program, the CBRC and the CSRC will, based on the improvement of the relevant systems, gradually allow more commercial banks to participate in bond trading on the Stock Exchanges and expand the scope of permitted trading.  

The Circular reflects the government’s aim to stimulate the bond market and to help domestic enterprises overcome the current financial challenges. As a specific measure to push the listed commercial banks to participate in bond trading on the Securities Exchanges, the Circular is publicly viewed as significant for the development of the bond market in China. The commercial banks’ re-joining the Stock Exchanges will not only urge the consolidation of the bond market, but also expand the direct financing channels and increase the bonds’ financing scale.