FTSE WGBI inclusion of Chinese govt bonds set to raise yuan’s intl status, shows ‘failure of US suppression’
Published: Oct 30, 2021 06:57 PM


UK index provider FTSE Russell on Friday officially included Chinese government bonds (CGBs) on the FTSE World Government Bond Index (WGBI), a milestone move that experts believe highlights global investors' confidence in CGBs and will raise the yuan's international status.

The FTSE WGBI is the last of the three major global bond indexes to include the CGBs. Friday's inclusion followed the Bloomberg Barclays Global Aggregate Index in April 2019 and the Government Bond Index Emerging Markets suite under JP Morgan in February 2020.

China's central bank, the People's Bank of China (PBC), said in a statement on Friday it welcomes the inclusion that fully reflects the confidence of international investors in the long-term and healthy development of China's economy and the continuous expansion of financial opening.

FTSE Russell gave its final approval for Chinese sovereign bonds to be included on its flagship bond index in March. It gave CGBs a 5.25 percent weighting - about $3.6 billion a month, at the time, and this weighting has now been raised to 6 percent, according to Chinese national broadcaster CCTV.

The weighting of CGBs in FTSE WGBI is expected to continue to increase, Gao Desheng, an independent economist and senior executive vice president of Bank of China Johannesburg Branch, told the Global Times on Saturday.

As there is excessive liquidity across global markets, with US and Western debts surging with an array of sovereign bonds offering negative yields, higher yields have given China's treasury bonds unparalleled attractiveness and advantages, Gao said.

The inclusion of FTSE WGBI has set the stage for inflows of billions of dollars into the world's second-largest economy, and is expected to largely raise the international status of Chinese currency yuan, according to experts.

A higher weighting of CGBs in FTSE WSBI will largely increase the proportion of the allocation of Chinese treasury bonds of international investors tracking the index, thereby increasing their demand for yuan and their country's yuan foreign exchange reserves levels, said Zhou Yu, director of the Research Center of International Finance at the Shanghai Academy of Social Sciences.

In today's uncertain global landscape, China's economy remains the major drive of world economic growth. China's high-level opening-up has enabled the strong growth of the Chinese economy to provide global investors with new opportunities, Gao said, adding that FTSE WGBI's inclusion is further proof that the US' unilateral isolating of China has failed.

Global Times