China: Freeing the bond market for foreign investors – ING

By FXStreet Prakash Sakpal, Economist at ING, suggests that with the Chinese proactive fiscal policy becoming more forceful in 2016 a supply overhang from a wider fiscal deficit will be a negative for government bonds this year.

Key Quotes

“The PBOC day before yesterday scrapped regulations limiting foreign investment in the country’s interbank bond market. The statement on the central bank’s website said that overseas commercial lenders, insurance companies, securities firms and asset managers would no longer need to apply for quotas to invest in the market. China’s is the third largest bond market in the world after the US and Japan. While giving foreign investors free access to the local bond market is a step in the direction of internationalizing the Yuan, we think its immediate intent is to stem the current outflow of confidence sensitive capital.

In another news, the head of PBOC’s statistics department Sheng Songcheng said in an article published by The Economic Daily that the government’s 3% warning line for budget deficit didn’t fit with China’s reality and the government could raise the deficit to 4% of GDP or even more to offset the impact of reduced fiscal revenue and need to support broader reforms. The 2015 deficit has reportedly …read more

Source:: FX Street