China opening the door to foreign bond buyers

It’s usually with the benefit of hindsight that economists determine when major inflection points occurred. Sometimes, though, they’re glaringly obvious while unfolding. The inclusion of Chinese bonds in FTSE Russell’s benchmark index is such a moment.

FTSE Russell is a London-based provider of stock market indices and associated data services. Just one year after it rejected China’s US$16 trillion government debt market, FTSE Russell has done a u-turn.

As such, it is giving investors not only another way to bet on mainland bonds but a new reason to do so. China is the world’s second-biggest debt arena and yet foreigners account for less than 3% of dealing in the Chinese market.

FTSE Russell is the third key global benchmark to greenlight China’s government bonds. It might, however, be the most impactful. No offense to Bloomberg Barclays and JPMorgan Chase, but in finance timing is everything.

And this “good housekeeping” seal of approval for Beijing, coming amid the US-China trade and tech wars, generated just the headlines President Xi Jinping needed.