China Bond Research Report Q1 2020

Summary

• Capital inflows rise despite a challenging time for China and other emerging markets.
• The coronavirus impact.
• Regulatory changes and market infrastructure enhancements.
• Performance of the FTSE Russell China BondIndexes.

Highlights in the Q1 report

• Foreign ownership of RMB-denominated Chinese government bonds rose to a record high in March as interest rates fell in many jurisdictions; and as the fallout from the coronavirus crisis rippled around the world. International investors owned a record 1.34 trillion RMB (US$189 billion) of government bonds as of end-March according to FTSE Russell calculations of China Central Depository and Clearing Co (CCDC) data. This brings foreign holdings of Chinese government bonds to 8.7% by end-March.

• The ripple effects of the coronavirus crisis continue to make an impact on markets around the world. China’s 10-year bond yields fell to record lows by end-March, falling further in April, as investors turned to sovereign debt because of the uncertainties unleashed by COVID-19.

• The National Development and Reform Commission (NDRC) and China Securities Regulatory Commission (CSRC) announced in early March that China has launched a registration-based system for enterprise bond sales, ending the previous approval mechanism, thus encouraging the funds raised to invest in projects that conform to the macro-control policies and industrial policies. Moving forward, bond-issuing enterprises will only need to send applications to the CSRC to register.