Highlights in the July report

  • Offshore holdings of Chinese government bonds hit a record high in June following their inclusion in a major global index. Foreign investors held a total of 1.16 trillion RMB (US$169.2 billion) bonds at the end of June, marking a 71.66 billion RMB increase over the previous quarter’s record, according to data from China Central Depository and Clearing Co (CCDC), China's main bond clearing house.
  • In the corporate bond space, a lack of ratings from international agencies has been a major obstacle for foreign investors to increase holdings, given that China’s domestic ratings regime is distinct, and not directly aligned with international credit rating methods. Almost 75% of issuers ranked by domestic agencies are graded AA or above. Furthermore, a 2017 white paper published by the Bank for International Settlements found global agencies graded Chinese offshore bonds lower than bonds issued onshore.
  • According to some media reports Chinese regulators could be close to releasing new green bond standards that would exclude polluting fossil fuel projects from corporate financing channels designed to lift environmental standards. Of the US$42.8 billion of green bonds issued in China in 2018, roughly US$31.2 billion met international criteria, said a report published by the Climate Bonds Initiative (CBI).

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