China Bond Party Attracts Few Takers

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China is engaged in a charm offensive to lure foreign money into its bond market, which has grown in a short period of time from a minnow to the third largest in the world, after the US and Japan, the Financial Times reported. The opening of the bond market to foreigners is part of a transformation in the international financial system, which is slowly linking up with a Chinese economy that was once walled off behind tight capital controls. It is a crucial step in Beijing’s plan to turn the renminbi into one of the anchor currencies of the global economy. But the risk for China’s economic planners is that no one shows up to their bond market party, amid fears over capital controls and default risk. International fund managers acknowledge that Chinese onshore debt is bound to become a big part of global fixed-income portfolios, but add qualifiers such as “eventually” and “medium- to long-term”. Few, it seems, want to go in first. “For an economy that is a tenth of the global economy with a similar share in global exports and investment, the singular lack of financial integration is striking and cannot last,” says Qu Hongbin, chief Greater China economist at HSBC in Hong Kong. Read more. (Subscription required.)