Panel 2: The Future of China’s Fixed Income Markets
9:30 am – 10:15 am
David Zhang, President & Board Director, TCFA (The Chinese Finance Association), Managing Director, Head of Securitized Products Research, MSCI
China has risen to become the second-largest bond market in the world. According to the Bank for International Settlements, outstanding issuance of US$13.81 trillion was recorded in China as of the second quarter of 2019. Developments such as the creation of Bond Connect Company Limited— a joint venture established in July 2017 by the China Foreign Exchange Trade System (CFETS) and Hong Kong Exchanges and Clearing Limited —have created an attractive platform for the international investment community to access onshore bonds. Partnerships with Tradeweb and Bloomberg have expanded this network. Meanwhile, other areas of fixed income, such as China’s asset-backed securities market and exchange-traded funds, have garnered the market’s attention.
Presently, foreign investors account for less than 5% of the onshore fixed income market. The inclusion of Chinese bonds into global fixed income indices supported by Bloomberg, J.P. Morgan, and others will influence investment on a broader scale in 2020. Beyond these measures, what will motivate investment into the Chinese fixed income markets? What characteristics of these instruments should investors be aware of? How does the international investment community navigate the initial steps to access these markets and then efficiently trade them? What pitfalls should investors be aware of?