Foreign holdings of Chinese bonds have jumped 50% in the past two years as overseas investors have seized on Beijing’s push to open up its estimated 73tn-yuan ($11tn) fixed-income market. But, if some commentators are to be believed, we have not seen anything yet.
Despite the buying spree, foreigners still only held 921bn yuan of Chinese bonds in October, according to data from the Chinese Academy of Social Sciences and Citi. At just 1.86% of the market, this is a smaller share (of an admittedly fast-growing market) than in early 2015. But inclusion in the world’s major bond indices, which some believe is more a question of “when” than “if”, could catalyze far greater flows, according to the Financial Times.
Analysts at Citi estimate that China’s inclusion in the JPMorgan Government Bond Index-Emerging Markets, Bloomberg Barclays Global Aggregate and London Stock Exchange Group’s World Government Bond Index would deliver additional inflows of $779bn by 2025.