Shanghai Codifies an Offshore Bond Regime in Pudong—A New Legal Anchor for China-Linked Capital Markets
Shanghai is set to formalize a dedicated offshore bond regime within mainland China. On January 5, the Standing Committee of the Shanghai Municipal People's Congress released the Provisions on the Development of Free Trade Offshore Bond Business in Pudong New Area, which will take effect on March 1, 2026.
Adopted on December 30, 2025, the rules constitute the first sub-national legislation in China to comprehensively govern offshore bond issuance conducted through a free trade framework. For international capital market participants, the significance lies less in market scale—at least initially—than in legal architecture: the provisions delineate who may issue and invest, how custody and settlement operate, and where regulatory responsibility ultimately resides.
Eligible issuers include offshore corporates, foreign government-related institutions, international organizations, offshore subsidiaries of Chinese companies, and overseas branches of Chinese financial institutions, subject to national regulatory approval.
Eligible investors similarly include offshore institutional investors, international organizations, and sovereign wealth funds. All participants must comply with AML, CTF, and anti–tax evasion requirements, aligning the regime with international regulatory standards.
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Issuers may choose the currency of denomination, with renminbi encouraged but not required. Funds are, in principle, to be used offshore; onshore use remains subject to existing cross-border capital controls.
Bonds are registered, custodied, and settled through approved institutions. A primary custody model applies by default, while multi-tier custody structures are permitted where offshore participation requires it. Settlement is irrevocable, and investor rights remain with beneficial owners.
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Issuers may choose the currency of denomination, with renminbi encouraged but not required. Funds are, in principle, to be used offshore; onshore use remains subject to existing cross-border capital controls.
Bonds are registered, custodied, and settled through approved institutions. A primary custody model applies by default, while multi-tier custody structures are permitted where offshore participation requires it. Settlement is irrevocable, and investor rights remain with beneficial owners.
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Banks, securities firms, rating agencies, law firms, and accounting firms—domestic and international—are encouraged to provide services related to free trade offshore bonds. Pudong-registered banks and securities firms may participate in underwriting, subject to regulatory approval.
Trading may take place over-the-counter or on organized markets. Issuers must disclose information accurately and on a timely basis throughout the life of the bond.
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