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China fixed income in charts

View this brochure to learn more about the growth, opportunities and integration of the China bond market.
01 April 2021
    Download the full reportPDF, 2.42MB

    Key takeaways

    • Sized at USD 15 trillion, China’s onshore bond market is enormous and the second largest in the world after the US1
    • Historically, China bonds have had low correlation with global bonds and with other credit markets.2 Overall China bonds can potentially offer diversification benefits and improve the yields of a global bond portfolio
    • FTSE Russell is the latest of major index providers to announce China bond inclusion in the last few years. The onshore China bond market is seeing strong demand from foreign investors, with foreign inflows into China government bonds and policy bank bonds totaling USD 49 billion just in the first two months of 2021.3 Positive fund flow dynamics should continue to support the RMB
    • The China bond market is seeing greater credit differentiation, pointing to the increased importance of underlying credit fundamentals and bottom up credit selection
    • Policy normalisation should lead to a continued elevated default rate compared to history for the China onshore market, despite the ongoing economic rebound. Systemic default risks should be off the table
    • On a relative basis, China bonds are offering a yield premium versus other comparative markets. The stability of China bonds is also bolstered by lower levels of duration than other global bond markets2

     

    Note 1: Source: AsianBondsOnline, data as of December 2020.
    Note 2: Source: Bloomberg, Markit, JPMorgan, data as of 26 February 2021.
    Note 3: Source: HSBC Global Research, central bank websites, March 2021.
    Source: HSBC Asset Management, March 2021