Foreign investors face limitations on hedging and lending against their renminbi holdings at a time when their renminbi holdings are growing and the Chinese currency has depreciated.
Some key issues need clarifying before foreign money will flow into onshore renminbi bonds, say bankers from Credit Suisse, Goldman Sachs and Natixis.
Amid the drama of China's attempts at managed depreciation of the renminbi, other Asian currencies are also expected to slide against the dollar this year – except India's.
In allowing its currency to be subject to so much speculation, Beijing risks investors losing faith in mainland assets, says Julius Baer's Asia head of research.
Despite the broad exodus from emerging market debt, offshore renminbi bonds have attracted flows and are expected to continue to benefit from renewed investor interest.
Hong Kong's central bank hopes that partnering Clearstream will help to reignite interest in its repurchase agreement settlement platform. To date very few deals have been closed.