Investing in China

Investing in China
CATEGORIES: Viewpoints

Investing in China

For years, PIMCO has closely monitored and researched the evolution of China and its macroeconomic impact on the global financial markets. A key component of this evolution and resulting influence is the increasing accessibility of China’s financial markets to global investors.

Historically, global investors seeking exposure to China have relied on offshore markets, including “H” shares ‒ Chinese companies traded on the Hong Kong Stock Exchange – and dim sum bonds ‒ yuan-denominated bonds issued outside of China. Now, however, China is also focusing on the onshore markets, providing access to global investors in four key ways:

  1. The “Qualified Foreign Institutional Investor” (QFII) and the “Renminbi Qualified Foreign Institutional Investor” (RQFII) programs
  2. Onshore and offshore stock exchange connections (e.g., Shanghai-Hong Kong Stock Connect)
  3. Bilateral arrangements, such as the recently launched Hong Kong mutual recognition initiative
  4. Direct yuan investment quotas from the People’s Bank of China

In our view, the value proposition Chinese fixed income presents is clear given the high real rates on offer there. Also, going forward, we expect China’s bond market ‒ which now consists primarily of government and corporate bonds ‒ to develop other sectors and instruments, offering additional opportunities. We also hold a broadly favorable view on Chinese equities generally, though security selection remains important.

There are other considerations when looking at local China markets, of course. Despite their massive size, they do not yet offer the level of liquidity necessary for full engagement with the global markets. While liquidity will evolve at the pace dictated by regulators, this pace is quickening. Diversification is another consideration, and we believe it’s only a matter of time before China’s economic footprint translates into global fixed income investors owning more Chinese assets, especially with developed markets offering such low yields in comparison.

Underpinning our positive outlook for Chinese investment is currency stability. In our view, China is likely to maintain currency stability as it attempts to transition to a more domestic-consumption-based growth model and achieve global reserve currency status for the yuan.

All of this adds up to an important opportunity for global investors. For more details, see “Understanding Investment Opportunities in China.


PIMCO’s industry-renowned experts analyze the world’s risks and opportunities, from global economic trends to individual securities.


By Month



Investing in foreign-denominated and/or -domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and the current low interest rate environment increases this risk. Current reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Equities may decline in value due to both real and perceived general market, economic and industry conditions. Currency rates may fluctuate significantly over short periods of time and may reduce the returns of a portfolio.

Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Investors should consult their investment professional prior to making an investment decision.