Foreign Holdings of Chinese Bonds Exceeded 2 Trillion Yuan in 2019

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Holdings of Chinese bonds by offshore institutional investors breached the two trillion yuan (USD$290.12 billion) threshold last year.

The latest data from the China Foreign Exchange Trade System (中国外汇交易中心) indicates that offshore institutional investors purchased 3.2 trillion yuan in Chinese bonds in 2019, while also selling a total of 2.1 trillion yuan, for net purchases of 1.1 trillion yuan.

As of the end of December 2019 a total of 2608 offshore institutional investors had entered China’s interbank bond market.

Offshore institutions held 2.1877 trillion yuan in renminbi-denominated bonds, for a full-year increase of 457.8 billion yuan.

Since December 2018 foreign investors have increased their holdings of Chinese bonds for 13 consecutive months.

Sovereign bonds are the preferred choice for foreign institutions active in China’s debt market. As of December 2019 foreign investors held 1.31 trillion yuan in sovereign bonds, accounting for 69.79% of their Chinese bond holdings.

A research report from China International Capital Corporation (CICC) indicates that the majority of survey respondents expect Chinese bond allocations by foreign institutions to markedly increase in 2020, potentially reaching 700 billion yuan or exceeding 1 trillion yuan.

The Chinese government has recently sought to expand foreign involvement in the domestic bond market, with a push to allow foreign-invested banks to underwrite local government debt.

The Ministry of Finance an­nounced on 6 Jan­u­ary 2020 that it was ac­tively guid­ing lo­cal gov­ern­ment fi­nan­cial de­part­ments in loos­en­ing the qual­i­fi­ca­tion re­quire­ments for wholly for­eign banks, Sino-for­eign joint-ven­ture banks and the branches of for­eign-in­vested banks to join un­der­writ­ing syn­di­cates for lo­cal gov­ern­ment bonds. 

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