Trading Credit Derivatives in China

To stimulate and energise China’s credit derivatives market, the National Association of Financial Market Institutional Investors (“NAFMII”) relaunched the market in 2016 by publishing new pilot rules and definitions for credit derivatives in 2016, with additional updates published in February 2024. A recent NAFMII survey reported a total of 187 credit derivatives transactions in China in the first half of year 2024, representing a year-on-year increase of 30%. Notably, foreign invested banks have become the most significant type of credit protection net buyers in China. 

In this bulletin, we summarise the key rules published by NAFMII on credit derivatives and set out major points that investors should be aware of when trading credit derivatives in China.