However, there are some key differences between the financial systems of China and most developed economies.
- High savings rate combined with a tendency to leave cash with banks means that liquidity in China is typically readily available.
- In stark contract with Western economies, virtually all Chinese debt is domestically financed and provided by local banks.
- Capital controls in China are still in place and, as shown in recent years, can be rapidly tightened if needed.
Credit opportunities amid deleveraging
In the face of mounting debt level, Bryan Collins, head of Asian Fixed Income and portfolio manager at Fidelity believes that prudent deleveraging in China over the medium term will support credit spreads and government bond yields as growth moderates further.
Market participants are reassessing risks associated with individual companies, prompting credit differentiation to take place. Hence, we think bottom-up credit selection will be increasingly important when investing in the China bond market, especially for credit-focused strategy such as China High Yield.
Fidelity is a leader in Chinese bond market. As an international fund house with a full-fledged fixed income team based in Hong Kong and Shanghai, connected research insights across fixed income and equity and a focus on superior risk adjusted returns, Fidelity can help you discover the potential of the China bond market.