Foreign investors increase holdings of Chinese bonds for 10th month

Foreign investors increased their holdings of Chinese bonds in June for a 10th consecutive month, and the amount hit a new high, data showed. Observers said on Sunday these figures underscore foreign capital's strong confidence in the stable growth prospects of the world's second-largest economy, and their positive feedback on steady progress in financial market opening-up.

As the third plenary session of the 20th Central Committee of the Communist Party of China (CPC) draws up a sweeping blueprint to guide China's reform and opening-up for years to come, it is expected that the conference will channel more confidence and stability into the country's financial market, adding to its allure as an investment destination as global financial volatility increases, analysts said.

As of the end of June, the value of bonds held by foreign investors in the interbank market set a new record of 4.31 trillion yuan ($592.88 billion), data released by the Shanghai Head Office of the People's Bank of China, the country's central bank, showed on Friday.

It was the 10th month in a row for foreign investors to raise their holdings, with the amount exceeding 1 trillion yuan during the past 10 months, financial news website eastmoney.com reported.

Foreign financial institutions also accelerated their entry into China's interbank bond market. As of the end of June, a total of 1,133 foreign entities had entered the market, the report showed.

Observers said that the overwhelming interest in yuan-denominated bonds among global investors mirrored their investment value, which includes minor price fluctuations and stable returns, especially as a Fed interest rate cut looms and concerns grow about the potential high volatility of US Treasury debt.

"The yields of Chinese bonds are also relatively immune to global financial market fluctuations, which is another reason for their increasing attractiveness," Yang Delong, chief economist at Shenzhen-based First Seafront Fund, told the Global Times on Sunday.

The reform-focused third plenum was held in Beijing from July 15 to 18. The gathering reaffirmed China's unwavering commitment to reform and opening-up and drew a clear path for China's continuous high-quality development.

Chinese and foreign analysts said that the third plenum will consolidate foreign investors' confidence in the outlook for the Chinese economy, which is the underlying logic behind their expanding investment in yuan-denominated assets.

"Even though the Chinese economy is facing some challenges, China will do better compared with many developed countries in 2024. As promoted in the third plenum, China will focus on high-quality development, and deepen its supply-side structural reform to create new drivers and strengths for realizing growth," Maya Majueran, director of Belt and Road Initiative Sri Lanka, a Sri Lanka-based organization that specializes in BRI cooperation, told the Global Times over the weekend.

He stressed that with these new and positive developments, China will achieve its GDP growth goal of about 5 percent, and that will create fresh opportunities for the world, injecting confidence and impetus into the global economic recovery.

China's bond market opening-up is seen as a crucial step in China's two-way financial market opening-up. The Bond Connect program was launched in July 2017, aiming to make the Chinese mainland's interbank bond market accessible to overseas investors and international bond markets for mainland investors.

At least 821 international investors had entered the Chinese mainland bond market via the program's northbound leg as of the end of May, according to Bond Connect Co, the management entity of the program.

Chinese bonds have also been included in major bond indexes such as the Bloomberg Barclays Global Aggregate Index, JPMorgan's Government Bond Index-Emerging Markets Index and the FTSE World Government Bond Index in the past seven years, signaling a further enhancement in the maturity and international influence of China's bond market.