China Approves Government Bond ETF to Grow Debt Market

(Corrects name of Guotai executive in third paragraph.)

China approved the introduction of its first exchange-traded fund of government bonds as policy makers seek to expand the nation’s debt market.

Guotai Asset Management Co.’s exchange-traded fund of Chinese sovereign debt will be listed on the Shanghai Stock Exchange and benchmarked against an index of five-year government bonds, according to a statement posted to the website of the China Securities Regulatory Commission yesterday.

The fund will be “a bridge” that allows individuals to invest in government debt traded on China’s interbank market, from which they are barred, Pei Xiaohui, fixed-income head at Guotai, was cited as saying by news website Sina.com.

China’s interbank market had 22.2 trillion yuan ($3.6 trillion) of outstanding debt at the end of November, according to Chinabond, the nation’s bond clearinghouse. That compared with 449 billion yuan of debt on stock exchanges where retail investors are allowed to trade, according to Chinabond.

Policy makers may allow more types of bonds to be traded on stock exchanges in a bid to boost volumes on the bourses, the Shanghai Securities News reported Dec. 26. That may include depositary receipts that allow debt currently tradable only on China’s interbank market to also be traded on exchanges, according to the report.

To contact Bloomberg News staff for this story: Aipeng Soo in Beijing at asoo4@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.