Securing China’s financial system

china

On June 30, Beijing launched Bond Connect, a programme which allows international investors to invest in the Chinese bond market via Hong Kong, and vice versa[1]. In March, another system, the China Interbank Bond Market (CIBM) [2], had already been launched. Both programmes are expected to have limited impact in the short term. But the Japanese bank Nomura, in an internal note[3] dated July 7, specifies that the goal is to obtain the insertion of the Chinese bond market in the major benchmarks calculated by JP Morgan, Barclays or WGBI. This introduction would favour a large influx of capital to China, thus to the Yuan, via index funds. Nomura predicts a “reallocation of bond investments” from the rest of Asia to China. Deutsche Bank, the leading bank operating on the currency and derivatives market, estimates that as much as $800 billion could go to the People’s Republic of China…

Read more in the latest GEAB bulletin / No 119, Nov 2017

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[1] Source: South Morning China Post, 03/07/2017
[2] Source: Reuters, 01/03/2017
[3] Source: Nomura Asia Economic Monthly, internal note, 07/07/2017