China's Stock and Bond Connect a sign of reform

CHINA launched the Bond Connect scheme on July 3, two weeks after MSCI announced (on June 20) that it would add 222 large-cap Chinese domestic stocks to its benchmark Emerging Markets Index (EM Index). Both events followed the inclusion of the renminbi in the International Monetary Fund's Special Drawing Rights (SDR) basket in October 2016.

In my view, these are signposts, not milestones as described by many analysts (who ironically cannot substantiate their milestone claim), for China's emerging global influence. Though their short-term market impact may be small, they may be long-term game changers that could boost China's asset prices over time.

Capital outflows