Citigroup has become the first American bank to obtain a license to settle bonds in China’s vast $9tn interbank bond market.

On Tuesday Citibank China announced it had received a type A bond settlement agent license from the People’s Bank of China, adding it to a growing list that includes the likes of BNP Paribas, HSBC, Standard Chartered and Deutsche Bank.

China’s onshore market is the third largest in the world and has attracted growing attention from international banks since Beijing’s surprise move last year to grant offshore investors more access.

Foreigners currently hold only about 2 per cent of of the $9.3tn (Rmb64.3tn) market, roughly on par with their share of mainland equities.

International banks have been slowly increasing their ability to serve their global clients in the mainland, where licence approvals frequently take months to work through.

Many investors have however been waiting for bond index providers to include onshore debt in global indices – a process that appears likely to happen only gradually. Last month Bloomberg became the first major bond index provider to include Chinese bonds in its global offerings by developing a parallel global benchmark including the mainland to run alongside its current China-free offering.

Similar to a move by FTSE in 2015 to for its equities indices, the parallel path allows fund managers to track indices with mainland securities, but stops short of forcing them to.

Investor appetite is not only one-way however. Last month foreigners trimmed their holdings of Chinese sovereign and quasi-sovereign bonds for the first time since October 2015 in the face of renminbi depreciation and moderate tightening of monetary policy by China’s central bank.

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