Photo: CFP

China's bond market has become an important choice for foreign institutions' global investment layout, as more than 1,100 institutions from over 60 countries have entered the interbank bond market as of the end of June this year, the State Administration of Foreign Exchange (SAFE) said during a press conference on Friday.

Wang Chunying, deputy head of the SAFE, said the performance of the global cross-border bond market has remained relatively sluggish so far this year, but foreign investment in the Chinese bond market has seen a generally positive trend.

"If we do not take into account maturity, in the first half of this year, foreign capital net purchase of domestic bonds reached nearly $79 billion dollars, reversing the trend of last year's net selling. Especially in the second quarter, foreign capital bought a net $58.5 billion in domestic bonds, at a quarterly higher level," Wang noted.

If we consider the maturity of the payment, foreign capital has been increasing domestic bond holdings for two consecutive months, with a net increase of more than $11 billion in June, according to Wang.

In terms of holders, foreign central banks are still the main foreign institutions investing in China's bond market, while foreign financial institutions are also active in China's bond market. These fully reflect the investment value and medium- to long-term allocation value of Chinese bonds, Wang said.

Trading activity by foreign institutions in the bond market is also on the rise, with total trading volume exceeding $2 trillion last year, more than eight times higher than in 2016 when the country further liberalized its interbank bond market, the official noted.

Foreign institutions have also expanded their investment targets including interbank certificates of deposit, in addition to treasury bonds and policy-related financial bonds. Meanwhile, they are now gradually investing in China's short-term financing bonds, medium-term bills and other credit bonds, as well as asset-backed securities, Wang said.

Looking ahead, foreign investors will continue to increase their holdings and steadily allocate yuan assets, as the investment value of yuan asset diversification and the advantage of meeting diversified investor allocations remain.

As China's monetary policy adheres to an approach with Chinese characteristics, yuan bonds move differently from those of both developed countries and emerging economies. At the same time, the size of China's bond market is still in the second place in the world with good liquidity, which facilitates diversified resource allocation by investors, Wang told the press conference.

China has steadily promoted the liberalization of the bond market to facilitate investment by foreign investors. As a next step, it will continue to optimize the opening of the bond market and promote product and service innovation, and there is room for stable and sustainable growth of foreign investment in China's bond market, Wang noted.

Global Times