FTSE Russell China Bond Research Report – Q1 2018
Highlights from the April report
- China attracted 346 billion RMB ($55 billion) of foreign funds into mainland bonds in 2017, central bank data showed. Roughly 33 percent of the ows since July of last year came via the Bond Connect, according to Bank of China (HK), marking a 41 percent increase from 2016.1
- Despite the continued evolution of China’s capital markets, policymakers are trying to limit spiralling debt levels and enter a period of more stable, and sustainable, growth. For example, Beijing is no longer tolerant of off-balance sheet municipal borrowing, and in 2018 might for the first time allow a default by a local government financing vehicle (LGFV).2
- While appetite for China bonds is increasing, foreign investors still hold less than 2 percent of China’s domestic debt, according to Bloomberg. By way of comparison, foreigners hold 11 percent of Japan’s debt. However, holdings of onshore Chinese bonds by foreign institutional investors have increased by about 60 percent since December 2016.3
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 Bloomberg. February 2018.
 Reuters. January 2018.
 Financial Times. January 2018; Bloomberg. February 2018.