Chinese financial markets have developed rapidly in recent years, both relative to the size of the domestic economy and the global economy. The Chinese government bond market has a market capitalization that now exceeds that of UK gilts and German Bunds. Reforms in Chinese financial markets, and inclusion of Chinese equities and bonds in major global indexes, have improved access to, and increased foreign participation in Chinese markets. In this paper, we review the transformation of this rising financial asset with a number of considerations, including:

  • Evolution and structure of the Chinese bond market
  • Relative performance of Chinese bonds versus other markets
  • Correlation of returns with other major markets
  • Impact of introduction into global bond indexes
  • Risks to the Chinese bond market