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On Monday, China took another step towards becoming home to the world’s largest bond market as onshore bonds began their inclusion into the Bloomberg Barclays Global Aggregate Index.

Over the next two years, hundreds of government and policy bonds will be included into the index.

Analysts say that the inclusion itself could fuel as much as $150 billion worth of inflows into the market, which is currently the world’s third-largest.

But according to JPMorgan China CEO Mark Leung, that’s just one piece of the puzzle.

The size of the Chinese bond market is only 90% of GDP, versus 200 to 250% in other major economies, Leung explained in an interview with Bloomberg.  That shows just how underdeveloped China’s bond market is in comparison with the rest of the world.

The inclusion of Chinese bonds in other indexes will be huge as well, he said. If you take into account other inclusions, the total aggregate of passive and active combined, the inflow could drive up to $300 billion of inflows, he said.

This is just one part of the push to further open China’s financial markets, a trend that has helped the sector outperform even before China’s equities rally this year.

As we wrote in February:

“The resilience of the financial sector in context of an overall market decline during the middle of 2018 suggests a structural change. China is opening its financial market to the world. Allianz Insurance already has the first license for a 100% owned insurance subsidiary and Union Bank of Switzerland has the first banking license, and many more will follow. China’s stock and bond markets are entering the major world indices (MSCI and Barclay’s Aggregate), and investors are pouring money into China.”

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