Insight

Capital market assumption: China fixed income methodology

Capital market assumption: China fixed income methodology

Jacob Borbidge, CA, CAIA (Senior Portfolio Manager and Head of Investment Research for Invesco Investment Solutions), Shuxing Deng, CFA (Strategy Development Manager) and Adrian Tong of IIS co-authored this article.

While Chinese policymakers have made big strides in recent years to provide accessibility to the onshore bond market, foreign-exchange policies, divergence from international credit rating standards and capital-control measures drive stark differences between Chinese and international bond markets. As such, in-depth research on the China onshore bond market is needed to provide local insights to international investors.

As China’s fixed income market opens further, investors are likely to increase their allocation to Chinese bonds. In this paper, we discuss how Invesco formulates our long-term capital market assumptions (CMAs) for both China onshore and offshore fixed income market. Investors may find our research helpful in their portfolio-construction process to determine the appropriate level of exposure to the Chinese bond market.