China’s rapidly expanding $15tn mainland bond market offers some tantalising prospects for pension funds and other institutional investors that have seen sources of income decline and disappear from their traditional hunting grounds in the US and Europe.

But a thicket of legal, regulatory, and trading risks lies ahead for international investors, according to the IMF, which has warned that the world’s second-largest fixed income pool requires sweeping reforms to raise standards.

Low liquidity and a shallow market present fundamental problems. Regulatory restrictions mean that domestic commercial banks, the most important owner of onshore bonds, tend to hold bonds to maturity. This reduces liquidity in the secondary market, leading to higher trading costs.