China’s Reforms: Will They Work?

China’s Reforms: Will They Work?

China’s Reforms: Will They Work? by Hayden Briscoe, AllianceBernstein

The internationalization of China’s currency is proceeding hand in hand with the liberalization of the country’s capital markets. If China can surmount its short-term challenges, the impact of these reforms on global economies and markets should be profound.

Of all China’s reforms, the one most likely to reverberate around the world is the liberalization of the country’s capital markets. In just a few years, it should lead to China’s bond and equity markets being incorporated into global indices, forcing a massive reweighting of portfolios as benchmark-observant investors reallocate assets to China just to stay market neutral.

To gauge the potential impact, it helps to review China’s progress on this reform to date.

Bonhoeffer Fund July 2022 Performance Update

Screenshot 27Bonhoeffer Fund's performance update for the month ended July 31, 2022. Q2 2022 hedge fund letters, conferences and more The Bonhoeffer Fund returned 3.5% net of fees in July, for a year-to-date return of -15.8%.   Bonhoeffer Fund, LP, is a value-oriented private investment partnership for . . . SORRY! This content is exclusively for Read More

China Has Opened the Door

The country began liberalizing its capital markets in 2002, when it launched the Qualified Foreign Institutional Investor (QFII) scheme, which allowed foreign investors to trade yuan renminbi (RMB)–denominated Class A Shares and government and corporate bonds on the Shanghai and Shenzen stock markets. Since then, the scheme has been steadily expanded. In 2011, the government established the Renminbi Qualified Foreign Institutional Investor (RQFII) program, to a