China pushes for bonds to be included in global indices even as some foreign investors seek delay
- China deputy central bank governor says mechanism ready for investors to put money into China bonds
- But some foreign investors say their back room systems not ready, want to delay inclusion China bonds in major global indices
Beijing is pushing hard for the inclusion of yuan-denominated bonds that are traded in onshore markets in major global bond indices, in an effort to encourage needed capital inflows.
But some foreign investors are pushing back on an early inclusion, claiming they have not yet created the necessary infrastructure to handle the investments that would result.
The Chinese government is urging bond indices to move forward anyway, arguing that lack of preparations by a few investors should not deny other investors the opportunity to own Chinese bonds.
Clearly, China needs capital inflows to fund its industrial restructuring and support for the economy, which has slowed dramatically because of the trade war with the United States, and because its once-massive current account surplus is shrinking rapidly.
The inclusion of Chinese bonds into global indices would automatically channel funds into China as many funds allocate money by passively tracking these indices.
To support the inclusion of Chinese bonds in these indices, Pan Gongsheng, deputy governor of the People’s Bank of China, told hundreds of delegates at the China Bond Market International Forum in Beijing on Thursday that China would create “a more friendly and accessible investment environment” for investors.
In addition, China would create exchange traded funds and foreign exchange hedging services for investors, he added.