Potential investors, though, should be aware that since Chinese bond ETFs are denominated in the local yuan currency. Consequently, investors will be exposed to currency risk – if the yuan depreciates against the U.S. dollar, the bonds could generate lower returns once converted into U.S. dollars.
In China, new yuan loans in November were a higher-than-expected 624.6 billion yuan, or $103 billion, compared to a 580 billion yuan median estimate, which suggests authorities are trying to stimulate growth, reports Bloomberg. The PBOC, though, has said that the economy “may see a decline in leverage” over a long period.
“The current pace of extension of credit is still rather strong,” Louis Kuijs, chief China economist at Royal Bank of Scotland Group Plc, said in the article. The latest data “will lead people to wonder how adamant are the authorities to rein in credit growth, how serious are they to contain the increase in leverage.”
PowerShares Chinese Yuan Dim Sum Bond Portfolio
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