Inter-bank bonds held by foreign investors down again in April
Published: May 20, 2022 12:33 AM
State Administration of Foreign Exchange photo: VCG

State Administration of Foreign Exchange photo: VCG

Inter-bank bonds held by foreign institutions dropped to 3.77 trillion yuan ($560 billion) as of the end of April from 3.88 trillion yuan in March, as different monetary policies between China and the US caused short-term pressure on yuan-denominated assets. But the long-term attractiveness of the Chinese bond market remains undimmed, domestic news portal reported on Thursday, citing experts. 

Foreign holdings of Chinese inter-bank bonds, comprised of government bonds and policy financial bonds, have fallen for three consecutive months since February. 

The readings for end-January, end-February and end-March were 4.07 trillion yuan, 3.99 trillion yuan and 3.88 trillion yuan, respectively. 

As of end-April, inter-bank bonds held by 1,035 foreign institutions accounted for about 3.2 percent of the total in China's inter-bank bond market. 

Analysts pointed out that the decline in foreign investors’ China bond holdings was due to diverging monetary stances taken by China and the US, the narrowing bond yield spread in the two countries and pressure from revaluation of Chinese assets.

However, analysts with Bank of China (Hong Kong) noted that for long-term investors rather than speculators, yuan-denominated assets will alternate between risk and safe heaven assets, and the mid- and long-term impact of these factors is controllable.

China’s bonds have relatively strong value for investors as compared to others on a global scale, Wang Chunying, spokesperson and deputy head of the State Administration of Foreign Exchange (SAFE), said on April 22.

In the long run, China's financial market will continue to open up and global investors will still need Chinese assets. The trend for foreign investors to invest in China's bond market in the long term will not change, Wang noted, adding that yield spread is not the only factor or even the dominant factor affecting foreign investment in Chinese bonds.