Spotlight: Experts say further opening up of China's bond market to benefit world

Source: Xinhua| 2019-03-14 16:10:27|Editor: mingmei
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WASHINGTON, March 13 (Xinhua) -- The further opening up of China's bond market has great potential and will bring significant benefits to the country and the world, experts said Wednesday.

"Most likely over the next decade, we would see the bond market as part of the whole financial system will become more important," said Alfred Schipke, International Monetary Fund (IMF)'s senior resident representative for China.

China's bond market is already the world's third largest, said Schipke, one of the editors of the book "The Future of China's Bond Market" published by the IMF, at a book forum held by the Center for Strategic and International Studies (CSIS).

However, he said, bond financing only plays a small role in the bank-centric financial sector, indicating vast potential for future development.

Mark Sobel, non-resident senior adviser at the Simon Chair in Political Economy of the CSIS, said a healthy bond market would create "pressures" for a more efficient Chinese banking system.

Sobel, who offered a commentary of the new book at the event, said the future of China's bond market is "extraordinarily important" for the global financial system.

Schipke noted that the inclusion of the renminbi (RMB) in the Special Drawing Rights (SDR) basket in November 2016 was associated with operational improvements in China's bond market, which has triggered a surge in global investor interest.

He also highlighted Bloomberg's decision to include RMB government bonds and policy bank bonds in the Bloomberg Barclays Global Aggregate Bond Index beginning in April 2019, which he expects will lead to additional inflows.

Changyong Rhee, director of the IMF's Asia and Pacific Department, said in his opening remarks at the event that the inclusion is an "important milestone" in China's financial integration into the world economy.

"That step both reflects the importance of those bonds in foreign portfolios and likely will encourage more purchases of those securities going forward," Rhee said.

Schipke said the team thinks that China's financial sector integration in the next decade will bring many opportunities for investors globally to diversify their portfolios.

Looking ahead, the book's contributors believe that a careful sequencing of reforms could help minimize risks and promote healthy development of China's bond market.

The team suggested that China strengthen the capacity of financial regulators, increase foreign participation, and improve communication, among other things, in order to further develop its bond market, said another presenter, Ding Ding, deputy division chief in the Caribbean I Division of the IMF's Western Hemisphere Department and one of the book's contributors.

Critically importantly, the Chinese leadership is determined to further open and develop its capital market, including the bond market, said Ding.

According to the government work report delivered last week, China will implement reform and opening-up measures in the financial sectors and improve policies on opening the bond market.

A further opening up of China's financial market could bring significant benefits to the economy, as it will serve real economic growth, facilitate growth diversification, and also promote the internationalization of the RMB, Ding said.

Regarding investor communications, Schipke told Xinhua that the bond market is meant to help companies and local governments raise money, and that investors need access to sound information, including future revenue streams, before making a decision.

"It is important to further the quantity of information that is available for investors," he said, adding that more transparency should promote the healthy development of bond market.