Share of Chinese Bonds Held by Foreign Investors Hits Record High


The latest data indicates that holdings of Chinese government bonds by foreign investors rose for the 15th consecutive  month in May.

Data from the Central Government Bond Registration and Clearance Co., Ltd. (中央国债登记结算有限责任公司) indicates that as of the end of May it was the trustee for over 1.2 trillion yuan in bonds owned by foreign institutional investors, for an increase of 234.6 billion yuan since the start of 2018.

The increase since the start of 2018 exceeds the rise in holdings for all of last year, while foreign institutions have increased their holdings of Chinese bonds for 15 consecutive months since March 2017.

According to analysts further opening of China’s financial sector in 2018 has heightened the lustre of renminbi assets, attracting a greater number of international investors to the Chinese bond market.

Xie Yaxuan (谢亚轩), chief macro-analyst with China Merchant Securities, points out that foreign institutions have seen their share of the Chinese bond market rise to a record level in 2018.

As of April 2018, the share of government bonds in China held by foreign institutions rose to 6.29%, for an increase of 1.32 percentage points since the start of the year.

The share of Chinese bonds held by foreign institutions rose to an unprecedented high of 1.98% in the same month.

“The core driver for the increase in holdings of renminbi debt by foreign institutions is the continual manifestation of the effects of China’s policy for opening of the bond market,” said Xie to China Economic Net.

At the same time the ongoing balance sheet expansion of the EU and Japanese central banks has expanded global liquidity, while the strength of the renminbi and comparatively high yields have heightened the appeal of renminbi assets.