Euroclear plans bond investment link with China

Euroclear plans to open a link for international investors to access the Chinese bond market, which will allow RMB-denominated debt to be used as collateral anywhere in the world, said the Financial Times.

The move from Euroclear, one of the world’s biggest securities depositories, is the latest step in China’s efforts to attract foreign investment into the country’s financial markets while promoting the global use of its currency. Euroclear plans to partner with China Central Depository and Clearing, a state-owned financial market infrastructure provider, to create the link.

The recent addition of some Chinese equities in MSCI’s flagship emerging markets index, as well as the planned inclusion of Chinese government debt in Bloomberg and JPMorgan Chase indices, are expected to usher a windfall of more than $2 trillion in foreign investments into the country over the next two years, reported the FT.

China has gradually launched a number of schemes that allow limited access for foreign investors to China’s domestic market. Bond Connect, launched in 2017, allows foreign fund managers to trade in China’s government and corporate debt markets without setting up an onshore trading entity.