Eye on Asia | The inclusion of China’s yuan bonds in global bond index is the start of a game-changing shift in global investment patterns
- On April 1, yuan-denominated bonds issued by China’s government and policy banks will be included in the Bloomberg Barclays Global Aggregate Index, tracked by US$2.5 trillion of assets under management
- Inclusion in global indices gives global asset managers benchmarks for tracking their performance
In 1980, sponsors of China’s Yizheng Chemical Fibers desperately needed capital to build a large-scale chemical fibre plant.
State-owned financial institutions were unable to help. Having nowhere else to turn onshore, Yizheng issued a US$50 million bond overseas to raise funds, becoming the first Chinese enterprise in the modern era to tap the international bond market.
Nearly 40 years on, Chinese issuers don’t have to venture overseas to attract foreign capital; investors are coming to China.
For decades, overseas investing in China was considered a complex and tightly controlled affair, something that many thought was best left for tomorrow, not today. China’s bond and equity markets may be the third- and second-largest in the world, respectively, but international participation remains low, at only 2.4 per cent of domestic bonds and around 7 per cent of freely traded A shares.
But a series of reforms has changed the picture in recent years – and tomorrow has come. More and easier avenues have opened up for foreign investors. Chinese bonds and equities are being included in major global indices. Slowly but surely, China’s capital markets are moving into the global investment mainstream.
