Unlocking The Potential Investment Opportunities In China's Local Government Bonds
2025-04-09 09:52:00 ET
Summary
- Local government bonds make up 28% of China’s bond market but account for less than 1% of foreign holdings due to liquidity and credit concerns.
- The Chinese government is improving transparency and liquidity, introducing a debt restructuring initiative to enhance investor confidence in LGBs.
- The FTSE BOC China Local Government Bond Index Series offers investors a structured benchmark to assess market performance and investment potential.
Foreign Investment in China's Bond Market
Over recent years, China’s bond market has gradually been opening up, providing foreign investors with greater access to what is now the world’s second-largest bond market [1] . While foreign participation in the Chinese fixed income market has been growing, non-residents’ investments remain predominantly concentrated in certain bond types, such as Chinese government bonds (CGBs) and policy bank bonds [2] : approximately 60% of the offshore funds invested in Chinese bonds are allocated to these two categories, which are generally considered by international investors as safer, more liquid and easier to access than other Chinese fixed income sectors.
Offshore China Bond Fund Assets by Fund Type
Source: LSEG Lipper. Data as of 28 February 2025. Past performance is no guarantee of future results.
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Unlocking The Potential Investment Opportunities In China's Local Government Bonds
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