New China-only bond index hailed as key to wooing overseas investors

An index that will track purely Chinese bonds was launched in Shanghai on Friday, targeting the growing number of international investors wanting a piece of the world’s third biggest fixed-income market.

Analysts hailed the new gauge as a key step in opening up China’s US$12 trillion debt market and predicted it would provide a much-needed boost to investment from overseas.

It is the first China-only bond index to be rolled out by IHS Markit and ChinaBond, and will initially track 368 bonds issued by the government and the country’s three “policy banks”.

“The opening of the China onshore bond market is a significant development for global investors. It will create new investment opportunities and diversification benefits for their portfolios,” said Kheng Siang Ng, Asia-Pacific head of fixed income at State Street Global Advisors.

“As major bond indices begin to include or track China bond markets either as part of global bond indices or stand-alone onshore China bond index, we would expect a steady rise of foreign bond inflows into China.

“Increased foreign participation in the China bond market will enrich the mix of investors trading flows, creating more active trading in this market.”