GT Voice: Investors who grab yuan assets are a guarantee of the nation’s success

A staff member shows banknotes and coins included in the 2019 edition of the fifth series of the renminbi at a branch of the Industrial and Commercial Bank of China (ICBC) in Beijing, capital of China, Aug 30, 2019. ( Photo: Xinhua)

Foreign investors increased their holdings of Chinese Treasuries in January, official data showed, revealing volumes on China’s financial stability and economic resilience as well as the continued opening up of its financial sector, despite the continued global concerns about soaring inflation and interest rate hikes that are needed to rein in rising prices.

It appears that China is determined to foster greater openness in its financial sector, even as the United States has in recent years intensified its attempt to decouple its economy from that of China. And that determination helps foreign investors feel comfortable gobbling up yuan-denominated assets, including stocks and bonds.

Foreign investors accelerated their purchases of Chinese government bonds in January, with their holdings totaling 2.52 trillion yuan ($396.6 billion) at the end of January, Chinese financial news site cls reported on Friday. cn, citing official statistics.

Foreign investors bought a total of 65.7 billion yuan of Chinese government debt in January, up from 61.9 billion yuan in December. Their total holdings of Chinese local government bonds have also reached 11.8 trillion yuan now.

Rising holdings of Chinese government bonds by foreign institutional investors underscores the resilience of the world’s second-largest economy, which has maintained its independence and flexibility in monetary policy, while the cycle of interest rate hikes US-led interest rocked global markets.

Foreign funds invested in Chinese government bonds and shares of Chinese companies signal an optimistic outlook for China’s economic outlook, especially in the longer term. Yuan-denominated assets, which are less correlated with those of developed economies as China has effectively put the brakes on inflation, have become increasingly favored as a safe haven.

Last year, China’s domestic bonds held by foreign investors rose by $166.6 billion, making yuan-denominated assets a major part of the increase in holdings held by foreign investors, said Wang Chunying, chief executive. deputy of the State Administration of Foreign Exchange, during a press conference in Beijing. at the end of January.

The recovery is also strong evidence of China’s efforts to open its financial market even wider to foreign investors, regardless of the international geopolitical tensions stoked by the US government in its sinister attempt to contain China’s economic and technological rise. .

China’s bond market, which has become the second largest in the world under the country’s financial liberalization, could be one of the best examples to expose the country’s role as a standard bearer of economic globalization, with its market opening allowing foreign investors to enjoy the dividends of China’s rapid economic growth.

As is well known, the bond connect, a link between the Chinese mainland and Hong Kong money markets, provided a breakthrough in mutual bond market access with the start of northbound trading in July 2017. The much-anticipated trade south was also officially on the rise. and went live in September 2021, making the bilateral bond market increasingly globalized, with trading readily available in both directions.

In a sign of the country’s rising profile in the global bond market, Chinese Treasury bonds were included in the FTSE Russell World Government Bond Index at the end of October.

Looking ahead, China is on a path of continued financial openness, underpinned by its growing economic prowess and high and new technological advancements. This will cement the country’s role as ballast for the global economy, becoming an even stronger player on the global financial landscape, despite disruption and obstruction from the United States.

Robert D. Coleman