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Tailored for investment professionals this site provides information on our products, strategies and services. Please remember capital is at risk and past performance is not a guide to the future.

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China, today

China’s bond (r)evolution

27 August 2019
Author: Wilfred WeePortfolio Manager

A key dynamic currently taking place in China’s bond market is the opening up of onshore bonds (bonds that are traded on China’s mainland) to foreign investors, as we discussed earlier this year.

The inclusion of these bonds to the Bloomberg Barclays Global Aggregate Index – a process which began in April – is a milestone with significant implications both for the composition of China’s overall bond market and for global fixed income investors’ portfolios.

The Bloomberg Barclays Global Aggregate Index now includes 347 onshore Chinese bonds, amounting to USD 840 billion of outstanding debt.1 Local currency Chinese bonds currently rank as the 6th largest currency component of the index and by mid-2020 they are projected to overtake Canadian and British bonds to reach 4th place, with an estimated USD 3.4 trillion represented on full index inclusion.2

Chinese bond basics

Onshore bonds

  • Issued onshore, by Chinese entities
  • CNY denominated

Panda bonds

  • Issued onshore, by non-Chinese entities
  • CNY denominated

Not to be confused with:

Dim Sum bonds

  • Issued offshore
  • CNH denominated

Kung Fu bonds

  • Issued offshore, by Chinese entities
  • USD denominated

Learn more.

To reflect this evolution, we’re making a change to our All China Bond strategy, moving away from a performance comparison index that comprises offshore bonds only. From September, we’ll be measuring ourselves against the Bloomberg Barclays Global Aggregate - Chinese Renminbi Index, which is the CNY carve-out of Bloomberg Barclays Global Aggregate Index.3 Widely used by investors across the world, we believe this index better reflects the broad China bond opportunity set.

China’s bond market is evolving, the role of onshore bonds is rising and their march to the mainstream continues apace. The question for investors has shifted from ‘should we invest in Chinese bonds?’ to ‘how best can we access the opportunity?’.

About Investec’s All China Bond strategy

Since June 2014, All China Bond has offered investors a way to access the broad universe of China-centric bonds – a universe rich in opportunities for active investors, bringing all-important yield potential and portfolio diversification benefits.

Our active investment approach is benchmark agnostic. That won’t change with the new performance comparison index. The team will continue to search the broad universe – spanning onshore and offshore bonds – aiming for the best investment opportunities across the market cycle, without being restricted to any index.


1. Source: Bloomberg, as at August 19, 2019. Projections based on the fact that the index inclusion rate is 0.3% per month.
2. Source: Bloomberg, Investec Asset Management as at August 19, 2019.
3. CNY is the currency symbol traded onshore. Until the end of August 2019, the strategy’s performance comparison index will be Markit iBoxx ALBI China Offshore Index, which comprises offshore CNH (Dim Sum) Bonds.

Emerging market: These markets carry a higher risk of financial loss than more developed markets as they may have less developed legal, political, economic or other systems.

Investments carry a risk of capital loss.

Wilfred Wee
Wilfred Wee Portfolio Manager

Additional Information:

This material is for informational purposes only and should not be construed as an offer, or solicitation of an offer, to buy or sell securities. All of the views expressed about the markets, securities or companies reflect the personal views of the individual fund manager (or team) named. While opinions stated are honestly held, they are not guarantees and should not be relied on. Investec Asset Management in the normal course of its activities as an international investment manager may already hold or intend to purchase or sell the stocks mentioned on behalf of its clients. The information or opinions provided should not be taken as specific advice on the merits of any investment decision. This content may contain statements about expected or anticipated future events and financial results that are forward-looking in nature and, as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, new legislation and regulatory actions, competitive and general economic factors and conditions and the occurrence of unexpected events. Actual results may differ materially from those stated herein.

All rights reserved. Issued by Investec Asset Management, issued August 2019.

The content of this page is intended for investment professionals only and should not be relied upon by anyone else

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