The launch of the Bond Connect initiative has helped foreign institutions to expand their holdings of Chinese debt to an unprecedented high of over 1.2 trillion yuan.
As of the end of May 2018 holdings of Chinese bonds by offshore institutions had risen to a record high of 1.208771 trillion yuan, for a year-on-year increase of 56%, according to the latest data from Chinabond.com.cn.
The surge in foreign holdings of Chinese debt arrives in the wake of the launch of the Bond Connect initiative on 3 July 2017, which enable overseas investors to acquire mainland bonds via Hong Kong.
Nearly a quarter of foreign investors who increased their holdings of renminbi-denoinated bonds made use of the Bond Connect initiative.
During the period from January to May of this year, Bond Connect hosted 2515 transactions worth a total of 291.11 billion yuan, for a daily average of 2.83 billion yuan.
As of the end of May 2018, a total of 315 offshore institutions have used Bond Connect to take part in China’s interbank bond market (CIBM)
Analysts point out that foreign investors now have an expanded range of options to participate in China’ debt market, including CIBM, qualified foreign institutional investors (QFII), renminbi QFII and Bond Connect.
Bond Connect has the advantages of being free of quotas, foreign exchange restrictions or lock-in periods.