The improvement in access to China’s large bond market started a conversation among global investors about the merits of allocating to Chinese bonds. As major global indices have begun including Chinese bonds, many institutional investors have been considering whether to make an allocation and, if they do, what level of investment that should be. As of June 2022, Chinese bonds accounted for 8% of Global Aggregate Bond Indices and our analysis shows that an allocation beyond that level can offer significant diversification benefits to a global bond portfolio. We believe those diversification benefits will likely remain in place over the foreseeable future. However, investors considering investment also need to take qualitative factors such as credit risk, the level of market development, access and operational differences into account. Furthermore, they should consider the potential differences in liquidity versus more developed markets when deliberating on their allocation to Chinese bonds. On this basis, we recommend that foreign investors intending to build onshore China bond exposures should do so gradually.