According to a Q&A session with reporters conducted by a responsible official from the relevant department of the People’s Bank of China on July 3 via the China News Service–Jingwei client, certain debt-based assets that have drawn attention from market institutions—such as policy bank bonds, railway bonds, Central Huijin bonds, and panda bonds traded in the interbank and exchange bond markets—are classified as sub-categories of fixed-income securities under the “Rules for the Identification of Standardized Debt Assets” and thus qualify as standardized debt assets.

What is the scope of the identification of standardized debt assets?

Article 1 of the “Recognition Rules” explicitly stipulates that all types of debt-based assets already designated as standardized debt assets are exempt from further recognition as such; any other newly added debt-based assets after the promulgation of the “Recognition Rules” may, in accordance with the relevant procedures, undergo standardized debt asset recognition; and once such recognition is obtained, asset management products may invest in these standardized debt assets to replace their existing non-standardized assets.

The People’s Bank of China, in conjunction with the financial regulatory authorities, shall conduct the designation of relevant debt-based assets in accordance with the conditions set forth in Article 2 of the Designation Rules and other relevant provisions. Thereafter, the People’s Bank of China, together with the financial regulatory authorities, will dynamically publish a list of debt-based assets that have been designated.

How should the relationship between the trading market and the infrastructure institutions applying for recognition as bond-equivalent assets be understood?

The five specific conditions set forth in the Guiding Opinions explicitly include “trading on trading markets approved by the State Council, such as the interbank market and the stock exchange market.” Here, the term “trading market” is a comprehensive and inclusive concept, comprising a collective of various financial infrastructures, market participants, and financial products and instruments.

Specifically, if a particular category of debt-based assets is designated as standardized debt assets, the infrastructure institution that submits the application will become an integral part of the interbank and exchange bond markets, coordinating closely with other bond-market infrastructure entities, and its related business activities will also be required to comply with the bond market’s regulatory framework.

How should the transitional arrangements in the “Recognition Rules” be understood?

During the transitional period specified in the Guiding Opinions, existing assets that, prior to the issuance of the Recognition Rules, were not included in the statistical scope for non-standard debt assets maintained by financial regulatory authorities before the promulgation of these Rules, shall be exempt from regulatory requirements pertaining to maturity matching, quota management, concentration limits, and information disclosure for non-standard asset investments. However, any such assets newly added after the Rules are issued shall not be granted such exemptions.

Do the assets of concern to market institutions qualify as standardized debt assets?

The “Recognition Rules” define standardized debt assets as “fixed-income securities such as bonds and asset-backed securities issued in accordance with the law,” and provide a non-exhaustive list of specific types of standardized debt assets. Certain debt-based assets that have attracted attention from market institutions—such as policy bank bonds, railway bonds, Central Huijin bonds, and panda bonds traded in the interbank and exchange bond markets—are subcategories of the fixed-income securities listed in the “Recognition Rules” and thus qualify as standardized debt assets. As for perpetual bonds and convertible bonds, if their asset classification as debt is clearly established under the Enterprise Accounting Standards and based on the accounting treatment applied by the issuing entity, they shall be treated as standardized debt assets; if, however, their asset classification does not fall under debt, the existing regulatory requirements shall remain unchanged, and such instruments shall not be subject to the regulatory provisions for non-standard assets set forth in the “Guiding Opinions.”

Furthermore, given that other publicly offered fixed-income asset management products still lag behind publicly offered fixed-income mutual funds in terms of investment scope, information disclosure, and the standardization of valuation methods, the “Recognition Rules” limit the inclusion of such assets as standardized debt instruments solely to the latter, thereby aligning with the spirit of the “Guiding Opinions.”

How should the excluded categories of non-standard assets under the “Recognition Rules” be understood?

The “Recognition Rules” define non-standard assets as debt-based assets that do not meet the conditions set forth in the preceding three articles; however, “deposits (including large-denomination certificates of deposit) and assets arising from bond reverse repurchase agreements, interbank lending, and similar transactions” are excluded. The primary rationale is that such assets neither satisfy the criteria for classification as standard debt assets nor exhibit the characteristics traditionally associated with non-standard assets, and therefore should not be categorically classified as either standard or non-standard assets. Given that financial regulatory authorities have already established relatively systematic and stringent regulatory provisions for these types of assets, and considering that they are not the primary focus of regulation under the “Guiding Opinions,” they are accordingly included in the category of exclusions from the definition of non-standard assets. As a result, existing regulatory requirements remain unchanged, and these assets will not be subject to the non-standard asset regulatory requirements stipulated in the “Guiding Opinions.”

Going forward, with the exception of the asset categories explicitly excluded as mentioned above, any other debt-based assets that fail to meet the five specific criteria for designation as standardized bonds shall be classified as non-standardized assets. (China News Service & Jingwei App)