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Ready or not, Chinese bonds are going global

TOKYO – Depending on how one looks at it, 2021 is either the very best or absolute worst moment for China’s bond market to go global.

The bullish camp points to the US dollar’s troubles and a US Treasury Department gearing up for an unprecedented borrowing binge as US debt tops US$28 trillion. That makes this an ideal window for British index giant FTSE Russell to add Chinese government bonds to its benchmark World Government Bond Index.

The bear camp worries that Beijing’s opacity and control-freak tendencies will collide with an investor class apt to punish wayward governments with higher borrowing costs. And what Chinese President Xi Jinping must court is the ranks of the undecided exemplified by Japan’s Government Pension Investment Fund (GPIF).

Winning the trust of one of the globe’s biggest investment pools, with $1.6 trillion worth of assets, is easier said than done. But if Xi’s financial team can win over Finance Minister Taro Aso’s crew, it should convince anyone China is, indeed, ready for the global debt market prime time.