As global investors continue to search for yield, China’s dominance in Asia’s bond market continues as its growing investor base and new issuances see no signs of abating. In 2017, the Asian G3 bond market experienced an exponential growth of 63% to nearly US$400 billion, after eight years of compound annual growth rates of 35%. China was no doubt a key contributor to this remarkable growth trajectory, accounting for 60% (US$200 billion) of new volumes issued. Seven years ago, new issuance by Chinese players was just $10 billion.
In the primary market, the dynamic between investors and issuers have also shifted, with the proportion of Chinese participants now accounting for 70 to 80% of the market, compared to the dominance of European investors in years past.
The growth in issuance volume by China has out run those of other Asian markets. Market experts believe the shift of market dominance to China away from Korean and Southeast Asian markets is likely to continue and is not reversible, given the steady economic growth of China’s economy and the increasing offshore funding needs of Chinese corporates.