China's Nuanced Outlook May Favor Corporate Bonds

Global investors see little cause for cheer in China’s short- to medium-term economic prospects, as the stresses in the country’s property sector continue to weigh on growth. But the likelihood of further policy easing—combined with the steady internationalization of the currency and some lively pockets of economic activity—points, in our view, to opportunities in Chinese corporate bonds.

China recently cut rates sooner than expected, but the move was downplayed by many commentators as unlikely to help the country’s ailing property sector. They missed the point, in our view. The significance of the cut was that it underlined China’s commitment to supporting broader economic growth, which is trailing the government’s target of 5% this year.