Foreign holdings of Chinese bonds rise for 32nd month

Overseas investors raised their holdings of Chinese bonds for the 32nd month in a row in July as the yield of Chinese government bonds remained attractive.

Overseas investors held a total of 3.38 trillion yuan (about 522.6 billion U.S. dollars) of Chinese bonds by the end of July, rising 75.4 billion yuan from a month earlier, data from China Central Depository & Clearing Co. Ltd. showed.

China's economic resilience, yuan's stable exchange rate as well as wider financial opening-ups have combined to drive the foreign inflows, analysts noted.

Both the interest rate and the RMB exchange rate markets in China saw little volatility, which made RMB bonds more attractive from a risk-return perspective, said Liu Jie, head of China macro strategy at Standard Chartered Bank.

Foreign interest in China's bond market has been running high since 2020, fueled by a faster-than-expected economic recovery, the wide spread of China's 10-year government bonds over their U.S. counterparts, as well as a firming yuan.

The inflows have also been fueled by moves of major global index providers to include Chinese bonds in their bond index.

Due to a low comparison base and consolidating recovery, China's economy expanded 12.7 percent year on year in the first half of 2021.