Foreign institutional investors boosted their yuan-denominated, domestically traded bond holdings by 40% during the first seven months of this year, according to data from the state-run China Central Depository & Clearing Co, despite a shaky currency and sliding stock market.
The total value of bonds held by overseas institutions now stands at Rmb 1.61 trillion ($234 billion) – still less than 2% of China’s enormous $11 trillion bond market.
Foreign institutions have been building up their yuan stockpiles for the past 17 months, Caixin notes, with central banks keenness to include yuan in their forex reserves likely a key factor. The IMF recently showed that global banks accounted for Rmb 150 billion of the Rmb 157.5 billion increase in foreign holdings of yuan-denominated assets during the first quarter of 2018.
China has been keen to attract more foreign funds to its capital markets, introducing a series of measures bringing them closer in line with international practices. This year, Beijing approved foreign banks to underwrite government bonds and has increased the access of foreign rating agencies to its credit system.