Fraser Howie is co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.” He has worked in China’s capital markets since 1992.
Global investors chasing after high returns have been pouring money into Chinese government bonds lately at a record pace. This raises the question of whether they are prepared for the possible ethical investing storm they may be stirring up.
How will they respond if queried about pension fund money financing the Chinese state as it represses its own citizens from Xinjiang to Hong Kong?
Figures from research group Wind Information show foreigners held 2.8 trillion yuan ($412.47 billion) of Chinese bonds as of Aug. 31, up from 2.19 trillion yuan at the beginning of the year and less than 1 trillion yuan just three years ago.
Goldman Sachs projects that another $140 billion is set to flow into Chinese government bonds following FTSE Russell’s announcement on Thursday that it will bring them into its global government bond indexes next year.
Over the past year or so, Cathay Pacific Airways, HSBC Holdings and Walt Disney have each tried with mixed success to finely balance the demands of China’s ever-so sensitive leaders with those of overseas customers and investors which have their own rising but very different expectations about appropriate corporate behavior.