AF China Bond 50 Index

Foreign Investors Exit China Bonds for Fifth Straight Month

 

A slowing economy has driven foreign investors out of China bonds for a fifth straight month.

China’s $20 trillion bond market has suffered continuous foreign outflows since February amid rising geopolitical tension and lingering Covid-19 outbreaks.

In June, foreign holdings of yuan bonds traded on China’s interbank bond market totalled 3.57 trillion yuan ($527.5 billion) at the end of June, down from 3.66 trillion yuan a month earlier, the People’s Bank of China said on Friday.

The yield of 10-year Chinese central government bonds is roughly 12 basis points lower than that of their US counterparts, compared with a premium of nearly 130 basis points at the end of last year.

More turmoil in China’s property markets, where homebuyers are refusing to repay mortgages on unfinished apartments (in several hundred projects), could sour foreigners’ sentiment further, ING China economist Iris Pang said.

 

 

But with China’s fiscal health better than other big countries’, and growth clouds hanging over the rest of the world, she said outflows could slow and the yuan could recover some of what it had lost this year.

Already the pace of outflows has slowed and the lockdown of Shanghai ended last month. “The story of US recession is brewing, and China is starting to recover. I don’t think capital outflows will last very long,” Pang said.

China has also launched stimulus measures to aid an economy that grew just 2.5% in the first half.

China took fresh steps this month to lure foreign bond investors, saying it would cut service fees, improve overseas access to foreign exchange hedging, and streamline the process of opening accounts.

Foreign holdings in Chinese bonds more than tripled from 2019 to 2021, but remain relatively small, accounting for 2.9% of the interbank debt market, according to Friday’s data.

 

  • Reuters, with additional editing by George Russell

 

 

READ MORE:

Fosun Bonds Rout Puts Spotlight on Group’s $40bn Debt – FT

Foreign Investors Exit Emerging Asian Bonds for Third Month

Hong Kong’s New World Issues Social, Green US Dollar Bonds

 

 

 

 

 

George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.

Recent Posts

Floods, Droughts, Earthquake, Big Freeze Cost China $3.3bn

China’s emergency management ministry said the country had also been hit by a drought, sandstorms…

15 hours ago

China Slams ‘Biased’ EU Over Electric Vehicle Imports Probe

A Chinese industry body chief said Brussels’ investigation was ‘tainted’ and stacked against his country’s…

17 hours ago

US Lawmakers’ Fury Over Huawei’s Intel AI Chip-Powered Laptop

Republicans have hit out at the Biden administration over continuing supplies of high-end American tech…

17 hours ago

Huawei Signals New High-End Smartphone After Mate 60 Success

Speculation has been growing for months about Huawei’s P70 model which is expected to be…

2 days ago

China Proposes New Trading, Listing Rules to Revive Market

China's Securities Regulatory Commission says it will bolster its supervision of company listings, delistings and…

2 days ago

‘Ban Chinese Electric Vehicles From The US’: Senator

Lawmaker Sherrod Brown, who has also demanded steep tariffs on Chinese EVs, says they are…

2 days ago