FTSE Russell China Bond Research Report - July 2019

Categories: Macroeconomics, Industry/Sector Analysis, Fixed Income, Financial Analysis, Investment Management, Investor Education

Country or region: Asia Pacific (Overall)

A quarterly report by FTSE Russell provides insights into the China bond market, including performance of the FTSE Russell China Bond Indexes.



•• Offshore holdings of Chinese government bonds hit a record
high in June following their inclusion in a major global index.
Foreign investors held a total of 1.16 trillion RMB (US$169.2
billion) bonds at the end of June, marking a 71.66 billion RMB
increase over the previous quarter’s record, according to data
from China Central Depository and Clearing Co (CCDC), China’s
main bond clearing house.

•• In the corporate bond space, a lack of ratings from international
agencies has been a major obstacle for foreign investors to
increase holdings, given that China’s domestic ratings regime
is distinct, and not directly aligned with international creditrating
methods. Almost 75% of issuers ranked by domestic
agencies are graded AA or above.2 Furthermore, a 2017 white
paper published by the Bank for International Settlements found
global agencies graded Chinese offshore bonds lower than bonds
issued onshore.

•• According to some media reports Chinese regulators could be
close to releasing new green bond standards that would exclude
polluting fossil fuel projects from corporate financing channels
designed to lift environmental standards. Of the US$42.8 billion
of green bonds issued in China in 2018, roughly US$31.2 billion
met international criteria, said a report published by the Climate
Bonds Initiative (CBI).

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