China's onshore credit market

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China’s onshore credit market

Growing importance calls for rigorous analysis

MANAGING YOUR RENMINBI CASH NEEDS AN EXPERT GUIDE

China’s Onshore Credit Market

In brief

• China has undergone remarkable economic growth over the past two decades, helped by rapid

industrialization and swiftly developing domestic markets. Underpinning this growth have been China’s

fixed income markets, which have seen a massive increase in size and scope, to such a degree that

China now has the world’s second-largest bond market, one difficult for investors to overlook—as a

source of yield and diversification and because of its influence on global liquidity and interest rates.

• Particularly in the past several years, China’s liberalization of both interest rates and financial markets has

triggered a surge in credit issuers and in the range of debt instruments and structures being issued.

• With the increase in opportunities in Chinese fixed income markets, however, has come greater risk.

The government’s implicit guarantee on all debts outstanding has been largely eliminated. The credit

fundamentals of some corporate issuers are weak. And domestic rating agencies’ methodologies

have limitations. Together, these issues are creating significant credit analysis challenges. Proper due

diligence and rigorous analysis of issuers are critical for understanding the true risk characteristics

of onshore credit investments, so that global and local investors may take advantage of the growing

market opportunities while minimizing risk.

Aidan Shevlin and Lan Wu, “China: The path to interest rate liberalization,” J.P. Morgan Asset Management, July 23, 2015,

https://blog.jpmorganinstitutional.com/2015/07/china-the-path-to-interest-rate-liberalization/.

Introduction: A brief history of China’s

onshore bond market

For more than six decades, bank borrowing and

lending were the principal sources of investment and

financing for Chinese investors and borrowers. Large

distortions existed throughout the financial system due

to the People’s Bank of China (PBoC) practice of setting

official borrowing and lending rates for all commercial

banks to charge their clients. Investors, having limited

options, placed their excess cash in low yielding bank

deposits; commercial banks enjoyed wide net interest

margins while only lending to low risk state-owned

borrowers; and private enterprises were typically

unable to access bank funding at all.

To address these problems and develop a more

market-driven financial system, the authorities

established the onshore bond market in 1996.

Initially, its growth was slow. But with the introduction

of corporate bonds in 2008—followed by local

government bonds in 2009 and negotiated certificates

of deposit in late 2013—the pace of bond issuance and

trading quickened (Exhibit 1).

A period of interest rate liberalization, part of the

fundamental financial reform undertaken during the

past decade,

combined with rapid financial market

innovation, has increased the number of investors

seeking market-driven yields, the range of Chinese

corporate issuers seeking funding and the variety

of instruments available (Exhibit 2). Together, these

forces have precipitated a twelvefold surge in the

size of China’s onshore credit market, contributing

to the depth, liquidity and vigor of the Chinese bond

market today.

China’s bond market has grown significantly over

the past several years

Exhibit 1: Corporate and other Non-Government Chinese

bond issuance

Source: AsianBondsOnline, China Central Depository & Clearing Co.

Ltd. (CCDC), J.P. Morgan Asset Management; data as at June 30, 2019.

2010 2011 2012 2013 2014 2015 2016 2017 2018

Local government

Policy banks

Negotiated certiﬁcates of deposit

Corporate bonds

Other bonds

CNY tn

J.P. Morgan Asset Management

The Chinese corporate bond market’s wide variety of instruments has contributed to its liquidity and vitality

Exhibit 2: Chinese credit instruments

Instrument Investment platform Tenor Characteristics

Commercial paper (CP) Interbank ≤1 year

Mainly issued by securities brokers and non-ﬁnancial

companies as a source of short-term funding

Negotiated certiﬁcates of deposit (NCD) Interbank ≤ 1 year Issued by commercial banks

Medium-term notes (MTN) Interbank ≥ 1 year

Enable regular issuance by a wide variety of corporations

without the need to seek regulatory approval for each issuance

Enterprise bonds Interbank ≥ 1 year

Mainly issued by unlisted corporations; typically local

government funding vehicles

Corporate bonds Exchange ≥ 1 year Mainly issued by listed corporations

Financial bonds Interbank ≥ 1 year

Issued by policy banks, commercial banks, special purpose

ﬁnancial entities, securities brokers and other nonbank

ﬁnancial ﬁrms

Local government bonds Interbank ≥ 1 year Issued by approved provinces and cities

Asset-backed bonds Interbank & Exchange ≥ 1 year Typically backed by auto loans and mortgages

Source: J.P. Morgan Asset Management; information as at June 30, 2019.

Shadow banking is all borrowing and lending activities beyond traditional commercial bank deposits and lending, and is a byproduct of past

financial regulation. Shadow banking activities sought to circumvent these restrictions and came in many different forms, including wealth

management products, asset management plans and trust products. These have become a significant source of systemic risk for China because

of their size, complexity, interconnection, opaqueness and moral hazard problem.

Market structure

The Chinese onshore credit market shares many

similarities with more developed bond markets around

the world, but legacy regulations, uncommon issuer

and investor characteristics, and unique local market

practices make it distinctive.

Investment platforms

China’s onshore bonds and other fixed income

instruments are traded primarily on three platforms:

the China interbank bond market, the exchange and

the commercial bank over-the-counter market (see

box, Chinese bond market investment platforms).

Issuers

Local governments are the largest issuers of bonds

and make up the largest sector in China’s onshore

credit market mix (Exhibit 3). They have been a

major contributor to the onshore corporate bond

market’s growth since 2015, when city and provincial

governments were first allowed to directly fund

infrastructure activities via the wholesale market

without prior government approval.

Commercial bank issuers represent the second-

largest sector. Historically, regulatory constraints

limited smaller commercial banks’ ability to grow their

retail deposit franchises, presenting an obstacle

to higher profitability. The introduction of bank-issued

negotiated certificates of deposit (NCDs) offered these

banks unprecedented access to wholesale funding at

attractive yields, allowing them to rapidly expand their

lending and shadow banking activities.

Other corporate bond issuers include state-owned

enterprises (SOEs) and private companies, mainly

in the construction, industrial, utilities and energy

sectors (Exhibit 3).

Chinese bond market investment platforms

Interbank

•

Accounts for 82% of outstanding issuance

•

48% of bonds trade exclusively on interbank

•

One-to-one platform where each market-

maker can make bids and oers

•

Used by professional investors

Exchange

•

Accounts for 45% of outstanding issuance

•

11% of bonds trade exclusively on exchange

•

Centralized trade matching system with

continuous price quotes

•

Used by retail and those not trading on the

interbank platform

Over-the-

counter

•

Commercial bank over-the-counter market

•

For small retail investors

Private

•

One-to-one market

•

7% of bonds are traded privately

China’s Onshore Credit Market

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

Jul-15 Jul-16 Jul-17 Jul-18 Jul-19

AAA corporates – Chinese domestic government bond

AA corporates – Chinese domestic government bond

Government Policy

bank

AAA

corporate

AA+

corporate

AA-

corporate

Chinese corporate bond spreads relative to government

bonds have been volatile

Exhibit 5: Chinese Corporate Bond Spreads By Rating

Chinese bond yields are little differentiated, except

those rated AA- or lower

Exhibit 6: Chinese Bond Market Yields By Sector And Rating

Source: China Bond, J.P. Morgan Asset Management;

data as at June 30, 2019.

Source: China Bond, J.P. Morgan Asset Management;

data as at June 30, 2019.

Investors

Domestic investors dominate the onshore corporate

bond market (Exhibit 4).

Fund and asset management companies that

structure and sell investment products, including asset

management products and mutual funds, are the

largest buyers of corporate bonds. The bonds’ attractive

yields and diversification benefits appeal to these buyers,

which focus on maximizing investment returns.

The next-largest set of investors are commercial

banks, insurance companies, policy banks and

securities brokers. Due to the size of their investment

portfolios, they collectively own a significant portion

of corporate bonds; however, because of their low

risk tolerance, they typically prefer the safety of

government bonds.

China’s credit markets are now open to foreign investors,

but participation remains low, with international

investors’ ownership share only about 5% of government

bonds and 2% of credit bonds outstanding—although

the combination of Chinese bonds’ inclusion in

benchmark indices and improved accessibility are likely

to increase foreign investor demand.

Characteristics and pricing

Chinese corporate bond market yields are more

volatile than those of similar securities in developed

markets. Macroeconomic and technical factors—

including central bank monetary policy, government

fiscal policy, frequent regulatory changes and

interbank liquidity conditions—all contribute to this

volatility (Exhibit 5).

Historically, credit ratings had a very low correlation

with credit bond yields and spreads, especially for

bonds rated between AAA and AA (Exhibit 6). Not until

A diverse mix of issuers make up China’s

corporate bond market

Exhibit 3: Chinese Credit Market Issuer Mix

Participation in China’s corporate bond market

is driven by investors’ distinct risk tolerances

Exhibit 4: Chinese Credit Market Investor Mix

Source: Shanghai Wind Information Co., ChinaBond.com, Shanghai

Clearing House, J.P. Morgan Asset Management; data as at June 30, 2019.

Source: Shanghai Wind Information Co., ChinaBond.com, Shanghai

Clearing House, J.P. Morgan Asset Management; data as at June 30, 2019.

ratings fall to AA- or lower do credit spreads widen

significantly, suggesting insufficient compensation

for onshore corporate bond investors, compared with

credit spreads in offshore markets.

Investment products 56%

Other banks 25%

Large banks 8%

Policy banks 3%

Securities brokers 3%

Foreign investors 2%

Insurance companies 1%

Others 1%

Local government 36%

NCDs 18%

Corporate bonds 11%

Finance bonds 11%

MTNs 11%

Structured ﬁnance 5%

Commercial Paper 4%

Enterprise bonds 4%

J.P. Morgan Asset Management

Rating agencies

In international bond markets, three nationally

recognized statistical rating organizations (NRSRO)—

Standard & Poor’s, Moody’s Investors Service and

Fitch Ratings—dominate. Their long-established and

rigorous rating methodologies are widely accepted

by international fixed income investors. Historically,

NRSRO ratings demonstrate a strong link to credit

spreads, and defaults are closely tied to the strength

of an issuer’s credit rating.

Until recently, none of these international rating

agencies had a license to operate in China, limiting

their coverage of Chinese issuers to those that required

an international rating for foreign bond issues. Those

that did receive a rating from international agencies

were subject to the Chinese government’s sovereign

credit rating—A1 (Moody’s), A+ (S&P) and A+ (Fitch) as

at July 31, 2019—which for all three NRSROs serves as

a ceiling on Chinese corporate issuers.

Instead of international agencies, nine local rating

agencies dominate onshore ratings, with the three

largest controlling about two-thirds of the market.

The authorities regulate the number of rating agencies

and rating nomenclature. By law, bond issuers are

only required to have one rating, making competition

among domestic agencies intense. Operating

independently from international market standards

and practices, local rating agencies have developed

their own methodologies, limiting investors’ ability

to map local ratings to international rating scales

(Exhibits 7A and 7B).

All domestic rating agencies use the same rating

scale (AAA, AA, A, etc.). While they do not explicitly rate

the sovereign, it implicitly receives the highest credit

rating. When determining a suitable rating, domestic

rating agencies typically place considerable weight on

the implicit presence of government support for bond

issuers and rely less on organizations’ financial data.

This use of a top-down methodology that factors in

implicit government support implies that most local

governments, state-owned enterprises and other

government-connected organizations enjoy AAA

ratings (Exhibit 8). Most private companies, by contrast,

have significantly lower ratings.

Recently, some international rating agencies have

received licenses to issue onshore credit ratings in

China. While they will face the same regulatory and

data quality challenges as their local peers, their entry

marks a significant and positive development. Their

The top three local Chinese bond rating agencies are China Chengxin International Credit Rating Co. (CCXI), China Lianhe Credit Rating Co. and

Dagong Global Credit Rating Co. At publication time, they were responsible, together, for 68% of total bond ratings.

strong reputations and rigorous rating methodologies

should increase international investors’ confidence

while boosting the professionalism of the domestic

credit rating industry.

Mapping local ratings to international ratings

scale is difficult

Exhibit 7A: NRSRO vs. domestic ratings, selected Chinese banks

Source: S&P, Fitch Ratings, CCXI, Lianhe, Shanghai Wind Information

Co., J.P. Morgan Asset Management; data as at June 30, 2019.

Domestic rating

Industrial

Ping An

Everbright

SPDB

CITIC

CMB

BoCOM

Postal

ABC

CCB

ICBC

BoC

International rating (S&P and Fitch)

AAA

AA+

AA-

A+

A-

BBB+

BBB

BBB-

BB+

Domestic rating

Evergrande

CoGard

COLI

Vanke

Baoshan

CCCC

Huadian

State Power

State Grid

CBIIC

Sinopec

CNPC

International rating (S&P and Fitch)

AAA

AA+

AA-

A+

A-

BBB+

BBB

BBB-

BB+

Exhibit 7B: NRSRO vs. domestic ratings, selected Chinese corporates

The preponderance of very high credit ratings suggests

room for improvement in domestic rating agencies’

methodologies

Exhibit 8: Chinese vs. U.S. corporate bond ratings

Source: S&P, Bank of America Merrill Lynch, J.P. Morgan Asset

Management; data as at June 30, 2019.

10%

20%

30%

40%

50%

60%

70%

AAA AA A Below A

U.S. China

China’s Onshore Credit Market

Baoshang Bank – Risk Implications

• Small retail deposits were fully guaranteed by China’s

deposit protection scheme.

• NCD and bond investors were not guaranteed and

faced losses on their investments.

Impact

• The takeover of Baoshang Bank highlighted the

signiﬁcant risks embedded in low quality, smaller

banks.

• Losses by large investors have strengthened the link

between risk and return, and reduced the perception

of an implicit guarantee.

Lessons

Headlines

• On May 24, 2019, Chinese regulators, citing severe

credit irregularities, announced the seizure of

Baoshang Bank for at least one year.

• The ﬁrst distressed bank takeover in over two decades,

it sent shock waves through the ﬁnancial system.

• Baoshang Bank, an unlisted city commercial bank,

is the 36th-largest bank in China.

• With an AA+ domestic rating, the bank was a frequent

borrower in the wholesale funding markets.

Background

• News of the takeover triggered a rise in credit risk and

a widening of credit spreads and Shibor* yields.

• The PBoC intervened quickly, injecting liquidity to help

stabilize ﬁnancial markets and prevent a panic.

• Smaller banks experienced diculties accessing

wholesale funding as investors began demanding

higher yields.

Fallout

• Baoshang Bank’s level of interbank liabilities

exceeded the regulatory cap, and the sources of its

loans were opaque.

• Delayed release of ﬁnancial reports, poor liquidity

levels and weak asset quality were key warning signs.

Warning signs

Shanghai Chaori Solar Energy Science & Technology Co. failed to repay interest due on a CNY 1 billion bond domestic bond.

Growing credit risk

For the first 65 years after the founding of the People’s

Republic of China in 1949, the local financial markets

never witnessed a default, nor did an investor suffer

a loss due to the nonpayment of a loan. Loss-making

organizations at risk of reneging on their debts were

either bailed out or taken over at the behest of the

government. This practice reinforced the widespread

belief that corporate debts in China are underwritten

by an implicit government guarantee.

That changed in March 2014, when China’s fixed

income market suffered its first-ever bond default.

Subsequently, the pace and size of bond defaults has

increased—especially as tighter liquidity conditions,

and new rules designed to curtail the shadow banking

sector, placed additional financial pressure on lower

quality corporate issuers and smaller regional banks

(Exhibit 9). Meanwhile, in April 2015, the Chinese

government introduced a deposit insurance scheme,

limiting deposit protection to CNY 500,000 per bank

account. Both these factors significantly eroded

confidence in the implicit government guarantee and

amplified the complexity of investing in the onshore

credit market.

The challenges of investing in the onshore credit

market are further magnified by a lack of experienced

credit analysts, weaker corporate governance

and limited financial disclosures. In addition,

underdeveloped bankruptcy laws, opaque financial

links, the scarcity of cross-default clauses and limited

rating actions by domestic rating agencies constrain

investors’ ability to ascertain whether a default has

actually occurred or what the likely recovery terms or

ratios might be.

A new phenomenon: Commercial bank credit risks

Until 2019, domestic bond defaults were mainly

concentrated in private company credits—companies

that had few government links and whose defaults

had limited market impact. Financial institutions

were not involved. However, the weakness of smaller

commercial banks was vividly highlighted by the

sudden seizure of Baoshang Bank in May 2019 and the

authorities’ July 2019 injection of capital into Jinzhou

Bank. While regulators took swift and decisive action

100

120

140

160

2013 2014 2015 2016 2017 2018 2019 YTD

CNY bn

Since the bond market’s first-ever default in 2014,

the pace and size of defaults’ have risen dramatically

Exhibit 9: Chinese onshore corporate bond defaults

Source: S&P, Moody’s, J.P. Morgan Asset Management;

data as at June 30, 2019.

Source: J.P. Morgan Asset Management; as at June 30, 2019. * The Shanghai interbank offered rate.

J.P. Morgan Asset Management

Industrial and Commercial Bank of China, Bank of China, China Construction Bank and Agricultural Bank of China are the Big Four. Postal Savings

Bank and Bank of Communications are the “plus two.”

to rescue and stabilize these banks, the likelihood

remains that investors could suffer capital losses on

their investments, underscoring the potential financial

and systemic risks that such small, at-risk commercial

financial institutions pose.

Small commercial banks, of which China has

approximately 4,000, are defined as all banks except

the “Big Four plus two”

and the joint-stock commercial

banks. While each of the small banks is diminutive

relative to the Big Four, they are large by international

standards and represent, in total, one-quarter

of China’s banking system assets, equivalent to

approximately 70% of China’s 2018 GDP. These banks

play a significant role in China’s financial system,

especially in local and regional markets, and are an

important conduit for private company borrowing

and lending. However, they tend to have weaker asset

quality and lower capital ratios.

Despite having limited retail deposit bases, small

banks have expanded rapidly in recent years.

Financing via NCDs and other types of corporate

bonds has allowed these banks to boost their

revenues and profits by expanding their lending

programs—often by means of opaque shadow

banking channels. By mid-2019, the vulnerabilities of

this banking model were exposed as the combination

of slower economic growth, tighter regulation and the

escalating trade war, hurt smaller banks’ profitability,

increased the number of nonperforming loans and

magnified liquidity stresses.

Aware of the importance—and vulnerabilities—of small

banks like Baoshang, the PBoC has enacted several

measures to ensure the flow of liquidity to them. While

these actions are helpful, smaller banks will likely face

challenging conditions for the foreseeable future.

Managing Chinese credit risk

The complexity of China’s onshore corporate bond

market and the recent escalation of credit risks

highlight the importance of due diligence and

rigorous, independent analysis to help balance the

risks and returns.

A China-focused investment policy

A good investment policy provides a solid foundation

for cash investment decisions, helps define short-

term investment objectives and lays out strategies for

China-focused investment

policy Take account of local

market characteristics,

instruments and practices.

Independent credit research

Conduct or outsource credit

research beyond basic

screenings to focus on stand-

alone risks.

Potential government support

Evaluate the likelihood that

an organization will be supported

during periods of ﬁnancial stress.

achieving them. It also outlines acceptable levels of

risk, return requirements, permissible investments

and other relevant constraints.

Multinational corporations operating in China should

ensure that their global (or U.S.-centric) investment

policy takes account of local market characteristics,

instruments and practices. Local corporations should

create or update their investment policies to prepare

them to successfully navigate developing domestic

markets, rapidly changing regulations and evolving

business requirements.

The need for capital preservation should help limit

the list of eligible securities. These may include

instruments such as exchange-traded repurchase

agreements, structured deposits and alternatives

like money market funds and separately managed

accounts. Theinvestment policy should also help

ensure adequate liquidity by outlining suitable

concentration and tenor limits for various sectors,

credit ratings and issuers while reflecting the size

and availability of local investment options. Most

investment policies will also require achieving

competitive returns; this will determine the lowest

acceptable credit rating and longest acceptable

maturity. InChina, that means considering the

sovereign ceiling and both the international and

domestic rating scales.

China’s Onshore Credit Market

Mutual fund guidelines have substantially more credit restrictions than asset management product

(AMP) guidelines

Exhibit 10: Csrc and International Rating Agency Money Market Guidelines and Egulations

Guidelines AAA rated money market funds Local money market funds Fixed income AMPs

Separately managed

accounts

Rating ≥ A- (international rating) ≥ AA+ (domestic rating) No minimum limit Customizable

Issuer

concentration

≤ 5% per issue

(≥ 7 days to maturity)

≤ 15% per state-owned

commercial bank

≤ 10% per corporate

(AAA domestic rating)

≤ 20% per AAA rated custodian bank

≤ 10% in issuers rated ≤ AAA

≤ 2% per issuer rated ≤ AAA

No maximum limit Customizable

Investment tenor ≤ 397 days ≤ 397 days No maximum tenor Customizable

Source: CSRC, Fitch Ratings, J.P. Morgan Asset Management; data as at June 30, 2019.

Independent credit research

Until recently, investors in China’s fixed income

securities conducted little credit research beyond

a basic screening of the sector, rating or credit

spread to Chinese government bonds. The perception

of an implicit government guarantee on all debt

outstanding encouraged a myopic focus on returns

and a disregard for issuers’ underlying financial

position. However, the rapid proliferation of defaults

has triggered a fundamental reassessment of

onshore credit rating methodologies.

The ultimate goal of credit research is to ascertain

the willingness and ability of a borrower to repay a

debt. For cash investors focused on liquidity and

security, avoiding rating downgrades and defaults

is a key priority. Therefore, Chinese credit issuers

should be assessed on their stand-alone capital,

asset quality, management, earnings and liquidity.

In addition, industry and operating trends provide

valuable context, and an issuer’s access to collateral

and alternative funding sources is important as well.

While the frequency of reporting and level of detail

published by Chinese bond issuers has improved

significantly, several credit research challenges

remain. These include accounting practices that

differ from international accounting standards and a

lack of clarity around certain items on many company

financial statements. These idiosyncrasies highlight

the need for investors to create well-designed credit

guidelines and utilize independent and experienced

credit analysts.

China Securities Regulatory Commission (CSRC)

oversight of money market funds and asset

management products is now more directed toward

risk and liquidity issues, and provides a basic

risk framework for these investments (Exhibit 10).

Nevertheless, the limitations of domestic credit

ratings can leave investors exposed to significantly

more risk than expected. In contrast, onshore

investment products with AAA ratings assigned

by international rating agencies offer higher levels

of security and liquidity, as they are based on

international rating systems and methodologies.

Potential government support

Finally, assessing the potential level of government

support is also important. State-owned entities

should not be considered state-guaranteed.

Organizations and corporations that are

systemically important and linked to the central

government are more likely to receive support

during periods of financial stress than regional or

city-owned entities—in those cases, the willingness

and ability of the potential guarantor to offer

support may be limited. Investors should assume

that for private companies little or no government

support is likely to be forthcoming.

J.P. Morgan Asset Management

Conclusion: Seek to minimize

downside risks with rigorous

analysis to access new

opportunities

• The Chinese corporate bond market continues to grow in size and importance, and is now too large

for global cash investors to overlook. The rapid increase in the range of issuers and instruments offers

investors significant diversification and yield benefits, yet also poses the significant challenge of

understanding and identifying credit risks.

• Rigorous analysis of issuers and counterparties is critical to understanding the true underlying risk

characteristics of onshore credit investments.

• A robust investment policy, combined with independent credit research and an objective analysis of the

potential level of government support to issuers, are critical steps that can minimize downside risks while

allowing cash investors to take advantage of this important new market opportunity.

Authors

Aidan Shevlin, CFA

Head of Asia Pacific Liquidity Management

J.P. Morgan Asset Management

Andy Chang, CFA

Credit Analyst, Asia Pacific Liquidity Management

J.P. Morgan Asset Management

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to wholesale clients. A copy of which may be obtained at the website of the Australian

Securities and Investments Commission HYPERLINK “http://www.asic.gov.au” www.

asic.gov.au. The class order exempts JPMAMSL and JPMFAL respectively from the need

to hold an AFSL for financial services provided to Australian wholesale clients on certain

conditions. Please note that JPMAMS is regulated by the Monetary Authority of Singapore

(MAS) under the laws of Singapore, which differ from Australian laws. Similarly, JPMFAL is

regulated by the Hong Kong Securities and Futures Commission (SFC) under the laws of

Hong Kong, which also differ from Australian laws.

Securities products, if presented in the U.S., are offered by J.P. Morgan Institutional

Investments, Inc., member of FINRA.

J.P. Morgan Asset Management is the brand for the asset management business of

JPMorgan Chase & Co. and its affiliates worldwide.

To the extent permitted by applicable law, we may record telephone calls and monitor

electronic communications to comply with our legal and regulatory obligations and internal

policies. Personal data will be collected, stored and processed by J.P. Morgan Asset

Management in accordance with our Company’s Privacy Policy (https://www.jpmorgan.

com/global/privacy). For further information regarding our local privacy policies, please

follow the respective links: Australia (https://www.jpmorgan.com/country/AU/EN/privacy),

EMEA (https://am.jpmorgan.com/us/en/asset-management/gim/mod/legal/external-

privacy-policy), Japan (https://www.jpmorganasset.co.jp/wps/portal/Policy/Privacy), Hong

Kong (https://am.jpmorgan.com/hk/en/asset-management/per/privacy-statement/),

Singapore (http://www.jpmorganam.com.sg/privacy) and Taiwan (https://www.jpmrich.

com.tw/wps/portal/Footer/Privacy).

This communication is issued by the following entities: in the United Kingdom by JPMorgan

Asset Management (UK) Limited, which is authorized and regulated by the Financial

Conduct Authority; in other European jurisdictions by JPMorgan Asset Management

(Europe) S.à r.l.; in Hong Kong by JPMorgan Asset Management (Asia Pacific) Limited,

or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia)

Limited; in Singapore by JPMorgan Asset Management (Singapore) Limited (Co. Reg.

No. 197601586K), or JPMorgan Asset Management Real Assets (Singapore) Pte Ltd (Co.

Reg. No. 201120355E), this advertisement or publication has not been reviewed by the

Monetary Authority of Singapore; in Taiwan by JPMorgan Asset Management (Taiwan)

Limited; in Japan by JPMorgan Asset Management (Japan) Limited which is a member of

the Investment Trusts Association, Japan, the Japan Investment Advisers Association, Type

II Financial Instruments Firms Association and the Japan Securities Dealers Association

and is regulated by the Financial Services Agency (registration number “Kanto Local

Finance Bureau (Financial Instruments Firm) No. 330”); in Australia to wholesale clients

only as defined in section 761A and 761G of the Corporations Act 2001 (Cth) by JPMorgan

Asset Management (Australia) Limited (ABN 55143832080) (AFSL 376919); in Brazil by

Banco J.P. Morgan S.A.; in Canada for institutional clients’ use only by JPMorgan Asset

Management (Canada) Inc., which is a registered Portfolio Manager and Exempt Market

Dealer in all Canadian provinces and territories except the Yukon and is also registered as

an Investment Fund Manager in British Columbia, Ontario, Quebec and Newfoundland and

Labrador. This communication is issued in the United States by J.P. Morgan Investment

Management Inc. or J.P. Morgan Alternative Asset Management, Inc., both are regulated by

the Securities and Exchange Commission.

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