£342m of UK investments will help fund Chinese debt

HUNDREDS of millions of pounds of British investments are set to be ploughed automatically into Chinese government debt.

Calculations for the MoS reveal that £342million held in UK funds is set to flow into the Communist country’s national coffers after Chinese government bonds were upgraded by the London Stock Exchange (LSE).

The LSE has given the green light for the Chinese Communist Party to list its bonds on the World Government Bond index. China’s sovereign debt is currently in the emerging market category.

UK funds have already invested £3billion in Chinese sovereign bonds, according to analysis by stockbroker AJ Bell. Promotion to the global index gives China access to much larger pools of capital.

China is expected to gain access to more than $140billion (£110billion) of investments when its bonds appear on the index from 2021. It will replace Britain as the sixthlargest member of the index.

Many UK funds – including some managed by Standard Life Aberdeen, Barings and Legg Mason – invest in the World Government Bond index and would become owners of Chinese bonds by default unless they actively avoid them.

The LSE group has negotiated with Chinese officials for a year to push for the rule changes needed for the listing. The exchange will now monitor Chinese markets for six months to ensure traders stick to the new regulations before starting to list the bonds.

Chinese sovereign debt boasts yields of up to 3.5 per cent – compared with near-zero, zero or negative yields on debt from most developed countries.

China’s promotion comes as UK banking giants face intense pressure from the Communist regime.

HSBC and Standard Chartered have been forced to pledge allegiance to Beijing even as the UK admonishes China for its crackdown in Hong Kong.

Neil O’Brien, Conservative MP for Harborough, said: ‘We allow China to access large amounts of capital – including the investments of British savers – but they have an extensive list of things we can’t invest in within China. The Chinese are trying to have it both ways, where they have access to Western capital, but don’t really run a freemarket economy.’