The skyline in Pudong, Shanghai. Photo: Wikimedia commons/Ermell

Nine renminbi-denominated highly liquid Chinese government bonds have been included in JPMorgan’s Government Bond Index-Emerging Markets (GBI-EM) indices from February 28. The inclusion will be completed step by step within 10 months.

JPMorgan Chase’s GBI-EM Global Diversified, GBI-EM Global, GBI-EM (Narrow) and GMI-EM (Narrow) Diversified will be affected by the changes, reported.

Last September, JPMorgan Chase, one of the world’s three largest providers of fixed income index products, announced it would include a number of Chinese government bonds that are highly liquid in a number of its benchmark bond indices in the 10 months from February 28, 2020. 

The first inclusion of Chinese bonds into the international mainstream bond indices was seen on April 1, 2019, when 356 yuan-denominated Chinese government and policy bank bonds started to be included in the Bloomberg Barclays Global Aggregate Index and ultimately accounted for 6.06% of the index’s total market capitalization.

The inclusion will be completed step by step within 20 months with a monthly increase of 5% of the assets’ value. Upon its completion, renminbi will become the fourth largest currency used in bond denomination after the US dollar, euro and yen.

Apart from the two major global bond indices, the FTSE World Government Bond Index (WGBI) also said it was going to include the Chinese bond market in its index watch list and would announce it in March.

Financial institutions expected the inclusion of Chinese government bonds in a number of JPMorgan benchmark bond indices would help China boost foreign capital inflows.

JPMorgan’s global index team had previously made a forecast that the inclusion of Chinese bonds in the world’s three main fixed income benchmark indices would create a capital inflow up to US$250 billion to $300 billion for China.

The full inclusion of Chinese treasury bonds in the GBI-EM GD index will bring in about $20 billion of foreign capital to China, said Liu Yu, an analyst at Guangfa Securities. 

According to data provided by JPMorgan Chase, the total assets tracking GBI-EM amounted about $226 billion, $202 billion of which was tracking the GBI-EM GD index. After the full inclusion, Chinese government bonds will account for 10% of the GBI-EM GD index. The 10% proportion is also the upper limit that a country can have in the index. 

Based on the size of GBI-EM GD, a total of $20 billion, or 140 billion yuan, will flow into China’s bond market over the next 10 months. Monthly inflow will be about $2 billion or 14 billion yuan.

The inclusions of Chinese bonds into international indices is meaningful as China can show the world its bond market infrastructure, supply of foreign exchange hedging tools and capital account convertibility have met international standards, said Huang Weiping, an analyst at China Industrial Securities.

Huang said China is no longer a “marginal market” that is difficult for foreign investors to enter. 

According to a research report previously published by the China International Capital Corporation, foreign institutions remained bullish on the valuation of Chinese bonds, which have been undervalued in the global markets.

They will continue to invest in Chinese bonds at the right time. Citing a survey, the report said a majority of bond investors believe that foreign institutions will increase their investments in Chinese bonds in 2020. The investment size could reach 700 billion yuan or even 1 trillion yuan.

This story was written by Huang Wanyi and first published at It was translated by Xu Yuenai.