On Monday, September 6, AmCham China President Alan Beebe attended the 2021 China International Fair for Trade Services (CIFTIS) to moderate an expert panel on the China Bond Market and China’s “Double Circulation” policy. Joining Beebe, the panel featured an array of industry experts: Hu Kun, former General Manager of Investment Banking & Asset Management at Bank of China; Jenny Zeng, Co-head of Asia Pacific Fixed Income at Alliance Bernstein; May Zhong, Senior Director & Analytical Manager for Corporate Ratings at S&P Global; and Ji Zhuang, Global Business Manager at Bloomberg. Panelists agreed that given the opportunities presented by the China market’s attractive yields and relatively low correlations, global investors are increasingly interested in China’s bonds. The group also discussed the challenges and opportunities ahead for global investors in the China market.
The panelists were predominantly optimistic about China’s global investment prospects. Hu Kun pointed to the current opening up and rapid growth as positive indicators, although he also encouraged regulators to continue with gradual improvements to the system. He noted that China still has a long way to go to match other more mature global markets, but specified that China differs greatly from other international markets and requires a unique, clear definition.
Jenny Zeng compared the Chinese Credit Market to the “elephant in the room” for global investors. With the market now the second largest in the world – and soon to be the largest – Zeng said it has become too big to ignore. She also noted opportunities will continue to emerge as China’s economic growth matures with increasing domestic consumption and larger demand. She remarked on the traditional trend of global investors gravitating towards off-shore markets, but said that with the on-shore China market opening up and an increasing number of financial institutions to choose from, the ability to diversify will become crucial.
Ji Zhuang agreed with the other panelists’ analysis that China is undergoing transformational changes with the opening of capital markets to global investors. He observed that China bonds are now being considered increasingly as a long-term investment, and that growing investor knowledge and demand is developing the market. Zheng echoed some of Zeng’s concerns about liquidity challenges, but said that as confidence and knowledge of the market increase, investors will become more and more comfortable.
May Zhong then cited an S&P Global case study to make her point. Three years ago, S&P set up its own subsidiary in China to assign ratings, becoming the first 100% foreign-owned credit rating agency in the industry. Since entering the market, she said they have developed a national scale leveraging the S&P framework tailored to the China market to provide transparent, objective analysis. Zhong also discussed how building a credit culture is key to a healthy bond market. She predicted that the demand for more transparency in order to make informed decisions will increase and that diversification will become more commonplace. Beebe wrapped up the fascinating panel discussion by agreeing with the prediction of improved information disclosure and transparency and identifying it as a large area of opportunity for all.