Investment ideas

Chinese bonds offer attractive yields

Bernhard Allgäuer · Dr Thomas Gitzel · Richard Schlup
Reading time: 3 Min
The Chinese bond market is the second largest in the world. And yet, it has received little attention from international investors until now, even though Chinese bonds represent an interesting portfolio supplement.

China is the mainspring of global economic activity. No other country contributes more to the world’s gross domestic product. On balance over the past five years, around one percentage point of the growth in global GDP has been attributable the People’s Republic, more than all the other industrialised countries combined.

Adjusted for purchasing power parity, China is already the world's largest economy (see article “Special case China”, Telescope investment magazine, The International Monetary Fund projects that the trend in China’s share of world GDP will most likely continue to increase.

Despite its outstanding economic track record, China has long played only a subordinate role in the global capital market. But this is changing. The market capitalisation of the Chinese bond market – which the International Capital Market Association (ICMA) currently estimates at USD 27.2 trillion – is the second largest after the US bond market (USD 33.3 trillion).

The lion’s share of outstanding Chinese bonds (71%) is directly or indirectly attributable to the public sector. In addition to government bonds, this also includes provincial debt securities and other quasi-government issues. The corporate bond segment totals some USD 7.4 trillion.

And the share of foreign ownership is just 3%. That number is far too low in relation to China’s economic importance or compared to the equity market.

As in many other aspects of the country, China’s bond market is not only huge, but also rather complex. That is why we have divided our investment idea into the following sections:

  • Why invest in Chinese bonds?
  • How can foreign investors gain access?
  • Which market segments are there?
  • How liquid is the market?
  • Are the ratings comparable?
  • How big is the currency risk?
  • What does VP Bank recommend?

Do you want to know more? Please get in touch with a client advisor at VP Bank or write to

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