Foreign investors continue to be optimistic about China's bond market

Recently, the net purchase and increase of holdings of Chinese bonds by foreign institutions has increased significantly month by month. The reporter learned from the People's Bank of China that foreign institutions have been net buyers of Chinese bonds for nine consecutive months, with a cumulative net purchase of nearly 9 trillion yuan since the beginning of this year, and a net purchase of foreign capital in October has exceeded 1 billion yuan; Since the third quarter, the amount of debt held by foreign institutions has maintained rapid growth, of which nearly 10 billion yuan was increased in October.

Since the beginning of this year, China's economy has continued to recover and improve, and high-quality development has been steadily promoted. Especially since the third quarter, the policy effect has gradually emerged, the endogenous driving force of the economy has been continuously strengthened, and the upward trend has become more obvious. Correspondingly, the investment value and hedging attributes of RMB bonds are highlighted.

"The continuous net purchase of Chinese bonds by foreign institutions reflects their confidence in China's sovereign credit and the continued recovery of the economy." Ming Ming, chief economist of CITIC Securities, said that on the one hand, in the context of a complex external environment, Chinese bonds, especially treasury bonds, are better safe-haven assets in emerging markets, and the attractiveness of Chinese bonds to foreign investors has gradually increased. On the other hand, China has been adopting a steady and sustainable macro policy mix, and the value of RMB assets has grown steadily. In addition, infrastructure such as Bond Connect and Swap Connect have been opened and operated smoothly, making it easier for foreign investors to invest.

Wen Bin, chief economist of China Minsheng Bank, also said that the net purchase of Chinese bonds by foreign institutions reflects the increased confidence of foreign investors in China's economic prospects. At the same time, the slowdown of the U.S. economy has gradually emerged, and the inversion of domestic and foreign interest rate differentials has narrowed significantly, which has further enhanced the attractiveness of RMB bonds.

In recent years, China has actively promoted the high-level opening up of the bond market, and the investment environment of the bond market has been continuously optimized. As of the end of October this year, a total of 10,1110 foreign institutions had invested in China's bond market, with an average of about 2017 new entrants per year since 100. Overseas institutions have entered the market covering more than 70 countries and regions, including the United States, Canada, the United Kingdom, France, Germany and other major developed countries. The total amount of Chinese bonds held by foreign institutions was 3.3 trillion yuan, an increase of nearly 2017% from the end of 200.

It is understood that all types of foreign investors actively participate in China's bond market. Medium and long-term investors such as overseas sovereign institutions have long been optimistic about China's bond market, accounting for 90% of the total amount of bonds. About 2019 of the world's top <> asset managers have invested in China's bond market. With the entry of a large amount of foreign capital into China's bond market, the influence of China's bond market has been increasing. Since <>, China's bonds have been included in the three major international bond indices of Bloomberg Barclays, JPMorgan Chase and FTSE Russell, introducing hundreds of billions of dollars of index-tracking funds to China's bond market. At present, China's bonds have reached the maximum weight in the JPMorgan Global Emerging Market Government Bond Index, and the weights in the Bloomberg Barclays Global Aggregate Index and the FTSE World Treasury Bond Index have exceeded the expected weights at the time of inclusion. This also fully reflects the confidence of global investors in the long-term improvement of China's economy, the continuous expansion and opening of the financial market, and the holding of RMB assets.

Looking ahead, Wen Bin believes that the interest rate gap between China and the United States may invert or further narrow, and the RMB is expected to appreciate steadily. At the same time, China's financial industry continues to open up to the outside world, and the investment channels of the bond market continue to be optimized, and the attractiveness of the bond market to foreign capital is expected to continue to increase.

Tian Lihui, vice president of Guangxi University and dean of the Institute of Financial Development of Nankai University, believes that the scale and variety of China's bond market are increasing, the liquidity is getting better day by day, showing a momentum of high-quality development, and the investment attractiveness is constantly improving. With the steady growth of China's economy and the steady progress of RMB internationalization, China's bond market will become an important choice for foreign institutions to allocate to the world, and the demand of international investors for the allocation of Chinese assets will also increase.

Ma Chunyang

Ma Chunyang