China has been on a roll as of late, in building up international economic infrastructure that spans from Eurasia to Latin America, known as the belt and road initiative, as well as a growing number of trading ties, and is now expected to see its bond market introduced onto the international bonds market index by the close of the year.
While China’s bond market tax standards and capital gains taxes are yet to be quantified, the prospect is looking decent thus far as the Chinese bond market credit rating largely exceeds international standards, with nearly two thirds of Chinese bonds holding the rating of triple-A. Asia Times Reports:
Amid ever-increasing foreign investor interest, China’s bond market is expected to be included in the international bond index as soon as the end of 2018, Yicai.com reported.
Huang Jiacheng, bond investment director at Fidelity International, who was engaged in part of the assessment work on the index committee, revealed the group’s progress. Most likely, the committee will also set up a certain period of observation.
However, Huang also pointed out that foreign capital still has concerns about China’s tax system, bond rating and liquidity before they invest in its bond market.
Huang Yi, president of Bloomberg China, said tax standards of China’s bond market needs to be further clarified. So far, foreign investors investing in non-government bonds are required to pay a withholding tax of 10%. The tax treatment of capital gains also remains to be clarified.
Meanwhile, China’s bond market credit rating is generally higher than international standards, with nearly 60% of bonds rated as triple-A and only 0.1% below triple-B.
However, such economic activities are lately taking much criticism from America, as the current administration increasingly views any form of rivalry, including economic, on the world stage, as a threat to America’s economic hegemony.
This became clear both with the new military doctrine that was announced earlier this month, and through new plans to develop a new trade route between Japan, Australia, India, and the US, currently known as the “Indo-Pacific Strategy“, in response to perceived Chinese “economic aggression“.
China is continuing to bolster its economy, both domestically and internationally, through transnational trade agreements and the pushing of its market strength to compete on international indices. Once tax considerations are worked out, China will bring its bonds to global markets, while America watches with much exasperation.