ABMI Group of Experts Report - Personal File Sharing

1.3.2 BarriersPeople’s Republic of ChinaRegarding inbound investment, it is indicated in the original report that a review of thelaws and regulations set out by the China Securities Regulatory Commission (CSRC)for the China Securities Depository and Clearing Co., Ltd (CSDCC) and the circularsof the People’s Bank of China does not indicate any law or regulation that wouldallow foreign CSDs or ICSDs to act directly as account holders in either CSD. Thereare no amendments or new law published during the year 2010 that would indicateregulation changed on this point. The restrictions regarding the convertibility of theRMB and restrictions on remittances will prevent Investor CSDs from establishinglinks with People’s Republic of China.Hong Kong, ChinaIt is mentioned in the original study that a positive precedent has been set by existinginbound and outbound links. Omnibus accounts are still permitted. The governmentof Hong Kong, China has established a Government Bond Programme that intendsto develop the debt securities market in Hong Kong, China. Separately, since 2007,there has been an increasing number of RMB bonds issued in Hong Kong, China bycorporates, financial institutions and the Ministry of Finance of the People’s Republicof China. The expansion of the RMB trade settlement scheme in June 2010 and therevised Settlement Agreement on the Clearing of Renminbi Businesses in July 2010will enable Hong Kong, China to be further developed as an offshore RMB centre;there is also the possibility to clear EUR and USD (with finality) via the HKMA’sRTGS. Suitable cash correspondent services may be available. There are norestrictions on the Hong Kong Dollar, so no legal regulatory issues are foreseen.IndonesiaThere is no new publication, amendment or circular that would change or updatelegal barriers and/or legal requirement already mentioned in the original report andwould prevent a CSD Linkage.JapanIn the original report it is mentioned that a positive precedent has already been set byexisting inbound and outbound links. Omnibus accounts are supported but manysub-custodians open segregate accounts for non resident investors so that theyprepare documents for tax exemption.In an attempt to revitalise and internationalise the Japanese market, the SpecialTaxation Measures Law was amended on 1 April 2010 with effect on 1 June 2010and, as a consequence, foreign investors may be eligible to a full exemption fromwithholding tax on convertible bonds. Eligible foreign investors can be foreignindividuals or foreign corporations. Foreign investors with a special interest in theissuing company will not be eligible for exemption.Before a foreign investor can obtain tax exemption at source, all the intermediaries inthe custody chain must have applied for, and obtained, from the Japan SecuritiesDepository Center Inc. (JASDEC) Foreign Indirect Account Management Institution(FIAMI) status for corporate bonds.10