China Approves Government Bond ETF to Grow Debt Market

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

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.

— With assistance by Aipeng Soo

(Corrects name of Guotai executive in third paragraph.)
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