Where does the attractiveness of RMB bonds come from?
Jin Guanping
At the end of 2021, the scale of foreign holdings of RMB bonds has reached another important integer mark.
According to data released by the Shanghai headquarters of the People's Bank of China a few days ago, as of the end of December 2021, foreign institutions held 4 trillion yuan of bonds in the Chinese interbank market, accounting for about 3.5% of the total custody of the interbank bond market.
International investors are increasingly active participants in China's bond market.
In 2021, about 750 billion yuan will be added, and more than 1,000 international investors will enter the market... The inflow of foreign capital into the Chinese bond market is showing rapid growth, and RMB assets are showing a strong attraction to global investors.
Why are RMB bonds so "sweet"?
First, international investors are optimistic about my country's economic development prospects.
Since the outbreak of the new crown pneumonia epidemic, international investors hope to find certainty in uncertainty, and my country's economic development and epidemic prevention and control have maintained a leading position in the world, attracting more and more international investors to turn their attention to China.
Especially in 2021, China's economy is stable and improving, the foreign trade is booming, and the RMB exchange rate is very resilient, attracting more international investors to enter the market to share China's economic dividends.
Most of these investors are foreign central banks and sovereign wealth fund institutions, and they pay more attention to long-term stable investment. Their deep participation in my country's bond market shows foreign investors' confidence in the medium and long-term prospects of China's economy.
Secondly, the further opening of the financial market has laid a solid foundation for attracting foreign investment.
China's bond market has developed into the world's second largest bond market, with rich varieties, complete trading tools, safe and efficient infrastructure, and considerable depth and breadth.
With the steady progress of China's bond market opening to the outside world, relevant regulatory measures and infrastructure construction are constantly in line with the international market, which will attract more global funds into China's bond market.
In the future, there is still considerable room for improvement in the degree of foreign participation in China's bond market.
China's bond market is large and liquid, but compared with other major economies and even emerging economies, the proportion of foreign capital in China's interbank bond market is still significantly low at 3.5%. Potential to continue to rise.
Supported by the stable and sound fundamentals of China's economy, the general trend of foreign capital holdings of Chinese bonds will not change.
The bond market has become an important front for attracting foreign investment in China's financial market.
China's economy has been stable for a long time and is improving. The recovery of domestic demand has accelerated, the investment momentum is strong, and consumption has improved significantly. The key factors supporting the confidence of international investors in the development of China's economy and financial market have not changed.
Therefore, many international investors have regarded holding Chinese bonds as a long-term strategy.
It should be noted that with the continuous increase in the scale of holding Chinese bonds and the changes in the international economic situation, after nearly three years of continuous and rapid increase in holdings, the increase in foreign investment will be more stable in the future.
At present, global monetary policies are beginning to differentiate, and many economies are gradually withdrawing from ultra-loose monetary policies.
As the global economy gradually recovers and external liquidity and interest rates return to normal, the pace of foreign investment in bonds may also be adjusted accordingly, and the pace of increasing RMB bond holdings is expected to be more stable.