Apr 1, 2019

China is growing its power in global financial markets

Illustration: Rebecca Zisser/Axios

Chinese onshore bonds, denominated in yuan, officially join the Bloomberg Barclay's Global Aggregate Index today, providing access to China's $13 trillion debt market, the world's third-largest after the U.S. and Japan.

By the numbers: The index is tracked by around $3 trillion of assets and will include debt securities issued by China's treasury or its 3 policy banks. The initial weighting will grow to 6% over a 20-month phase-in program, meaning about $180 billion of investor capital will flow to China.

Why it matters: This is a major milestone in China's development as a growing power in global financial markets.

  • "We're lucky that China is going slow in opening up because it would create enormous disruption," MSCI CEO Henry Fernandez said, noting the higher yields for Chinese government debt of around 3%. The index maker in February quadrupled the percentage of Chinese stock access in its EM indexes.

Today's inclusion will make the yuan the fourth-largest currency component in the globally tracked bond index behind the dollar, euro and yen. Right now foreign investors own just 2% of onshore bonds, according to Bloomberg.

Be smart: That's a big step considering the significant concerns about Chinese government involvement in the country's businesses and its currency. Further, its ratings agencies are seen as unreliable and sometimes untrustworthy.

  • "There are some risks associated but there are also some very good things happening, a lot of progress being made," Kate Jaquet, a portfolio manager at Seafarer Capital Partners, tells Axios. "That needs to be understood in a less biased way."

What's next? Chinese government debt also is on a watchlist of bonds to join FTSE Russell’s World Government Bond Index.

Ratings agencies Moody's and Fitch are working to launch ratings units in China to allay some investor concerns. S&P was granted approval in January.

  • "This is a market to watch and understand because whether people like it or not these bonds are coming," Jaquet says.

Go deeper

Bloomberg denies telling a pregnant employee to "kill it"

Photo: Scott Olson/Getty Images.

Former Mayor Michael Bloomberg on the debate stage Tuesday denied telling a former employee to terminate her pregnancy.

Catch up quick: Per the Washington Post, a former saleswoman has alleged workplace discrimination against Bloomberg and his company and says Bloomberg told her to "kill it" when he learned she was pregnant. Bloomberg denied the allegation under oath and entered a confidential settlement with the woman.

Debate night: Candidates' last face-off before Super Tuesday

Sanders, Biden, Klobuchar and Steyer in South Carolina on Feb. 25. Photo: Jim Watson/AFP via Getty Images

Sen. Bernie Sanders wants to keep his momentum after winning New Hampshire and Nevada, while former Vice President Joe Biden hopes to keep his own campaign alive. The other five candidates are just trying to hang on.

What's happening: Seven contenders for the Democratic presidential nomination are in Charleston, South Carolina, for the tenth debate, just days before the South Carolina primary and a week before Super Tuesday. They're talking about health care, Russian interference in the election, the economy and race.

Go deeperArrowUpdated 7 mins ago - Politics & Policy

Sanders to Putin: You won't interfere in any more elections if I'm president

Sen. Bernie Sanders sent a message to Russian President Vladimir Putin on the debate stage Tuesday, stating, "If I'm president of the United States, trust me, you're not going to interfere in any more American elections."

The big picture: It was unveiled last week that Russia has been interfering to boost Sanders' campaigns in an apparent attempt to strengthen President Trump's bid for reelection. Former New York Mayor Michael Bloomberg said that "Vladimir Putin thinks that Donald Trump should be president of the United States, and that's why Russia is helping [Sanders] get elected.