China’s fixed income markets have recently garnered a lot of global attention, the vast majority of coverage casting a negative shadow over this untapped market. Many foreign investors may be considering sitting on the sidelines until concerns subside. Z-Ben Advisors has a broader perspective. The long-term prospects of China’s fixed income markets remain immensely attractive: we forecast a growth from USD7.4tr in 2015 to USD17tr by 2021. Just as important as size are market developments. Within this Strategic Outlook, we discuss how risk pricing is occurring and how growing participant numbers and diversity have already begun the move towards price discovery onshore. 

China’s fixed income markets are set to become increasingly necessary for managers around the world, and two events make 2016 the one year that sitting on the sidelines isn’t likely an option. In October, the RMB will be added to the IMF’s SDR basket, boosting the need for China exposure in global portfolios. This is boosted by February’s announcement of quota-less access to domestic fixed income markets for foreign investors and May’s release of the execution details. Z-Ben Advisors has highlighted key areas of demand and how these can drive the development towards market-oriented pricing.

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