Irresistible? Pension funds plot move on China's $16 trillion sovereign bond market

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China's $16 trillion sovereign debt market is the proverbial elephant in the investment room. But it's becoming too big to ignore, even for the most risk-averse Western investors.

LONDON - China’s $16 trillion sovereign debt market is the proverbial elephant in the investment room. But it’s becoming too big to ignore, even for the most risk-averse Western investors.

“Not all our clients invest in China’s bond market, but they are all looking into it,” said Sandor Steverink, head of Treasuries at APG, which manages a third of the assets of the 1.5-trillion-euro Dutch pension industry. Western pension funds make up a tiny cohort of the foreign investors in yuan bond markets, but their presence is growing.

In addition, some say the country still has further to go in opening up its markets and worry that while capital controls, which made repatriation of profits difficult, have been eased, they could also be tightened. However their money managers, and certain central banks that track investment flows, can provide a window.

She declined to give details to protect the anonymity of her clients but said her company, part of the BNY Mellon Group, had also been asked by other UK and European-based pension funds to explore Chinese debt investment. Some other investors who allocate funds on behalf of European pension fund clients, including Pictet Asset Management and Willis Towers Watson, also said they were seeing more interest in Chinese bonds from the pension industry.Pictet, with assets of $600 billion, does not break down flows by investor type but said inflows to its Chinese bond fund had risen from $144 million to $770 million in 2020.

 

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This maybe be win-win in short term for China and investors, but could be lose-lose in long term. I've never trusted communist and never will. A complete control is in it DNA. Any time they feel threatened, that greedy trap door could shut quickly. Nothing is risk free.

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