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December 11, 2019

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Market access for foreigners

The Chinese bond market has seen increasing channels for foreign investments, according to Fitch Ratings.

Foreign investors held around 2 percent of the total domestic bonds outstanding till the end of 2018, mostly central government bonds, up from 1.5 percent at end-2014, according to the report.

“Regulators have been improving market access for foreign investors,” said Zhang Shuncheng, associate director of China corporate research.

“The latest move was the cancellation of quota limits on the Qualified Foreign Institutional Investors and the RMB Qualified Foreign Institutional Investors in September.”

Foreign investors can invest in the Chinese bond market through four main channels: the QFII scheme, the RQFII scheme, China Interbank Bond Market access for long-term investors and the Northbound Trading Link via the Bond Connect program.

China’s State Administration of Foreign Exchange announced on September 20 this year that it would remove the quota limits on the QFll and RQFll schemes, along with the restrictions on countries or regions, to further open up the domestic capital market to foreign investors.

The Chinese bond market, the second-largest in the world, has drawn increasing interest from foreign investors as being “too big to ignore,” the report said.

Quite a few global bond indexes, including Citi’s Emerging Markets Government Bond Index, the Asian Government Bond Index and the Asia Pacific Government Bond Index, as well as Bloomberg Barclays’ Global Aggregate+ China Index and the Emerging Market Local Currency Government China Index, have included China’s central government bonds.


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