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Foreign investors withdraw record money from Chinese bonds

Foreign investors reduced their holdings of about $15 billion in Chinese bonds in March.

China’s data released on Friday showed that investors dumped 51.8 billion yuan ($8.1 billion) of Chinese government bonds denominated in yuan in the past year. March.

In addition, foreign investors also sold a variety of other renminbi bonds, equivalent to about $6.2 billion in bonds issued by banks. March is the 2nd month in a row and the month that recorded a record withdrawal of foreign investors from Chinese bonds.

In February, foreign investors also withdrew more than 7 billion USD from Chinese bonds through the trading channel with Hong Kong.

WSJ Citing analysts from financial experts, this sell-off is due to many reasons, such as concerns about geopolitical risks when investing in China, economic instability as well as falling yield spreads. the second largest bond market in the world compared to the US bond market.

Lujiazui Financial Center (Shanghai, China).  Photo: Reuters

Lujiazui Financial Center (Shanghai, China). Photo: Reuters

Zhaopeng Xing, senior China strategist at Australia & New Zealand Banking Group, said some international funds are concerned about holding Chinese assets following harsh Western economic sanctions on Russia. .

On the other hand, according to him, it is likely that the Central Bank of Russia will sell Chinese bonds to raise cash and repay foreign debts, because Russia’s assets in the US, Japan and the EU are frozen.

However, Jonathan Fortun, an expert at the Institute of International Finance, said that the amount of money that foreign investors withdrew from the Chinese bond market recently “is too small compared to the total amount of Chinese debt that they have. owns, about 561 billion USD”. But he said this sell-off is notable because China has often stayed out of the way of asset withdrawals during previous periods of market stress, such as the shock of the Covid-19 epidemic or the trade war with the US.

“The trend of withdrawing money from Chinese bonds may still continue in early April,” said an expert from the Institute of International Finance.

In recent years, global index providers have added Chinese debt to their benchmarks. As a result, international demand for renminbi-denominated bonds increased.

Last year, the spread between US and Chinese bond yields was more than 2 percentage points. But now this difference has receded to 0.12 percentage points, according to FactSet calculations. Analysts expect the US-China bond yield differential to continue to decline in the coming months. That is, Chinese short-term or long-term bonds will yield lower yields than similar US bonds.

Information released on Thursday by the Foreign Exchange Administration of China (SAFE) said that, despite market fluctuations, foreign direct investment (FDI) into the country will recover in the long term. They also confirmed that cross-border investment flows are still at a normal level and are under control.

Anh Minh (according to WSJ)

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