Chinese government bonds will join the FTSE Russell World government bond index, or WGBI, over a period of 36 months from October 2021. In this paper, we closely examine the impact of inclusion of the Chinese government bond market in global bond indexes—both private sector and official holdings—to help global investors assess potential portfolio flows and think about potential changes to the nature of their asset allocation decisions. 

Given that foreign holdings of Chinese government bonds have been low historically, there is the potential for them to increase significantly. This could amount to US$130-160 billion to match China’s inclusion in the WGBI alone, and a further US$207 billion in central bank inflows, assuming private investors seek to move to benchmark index weight, and central banks closer to the renminbi’s special drawing rights weight over time.