Steady growth strengthens appeal of renminbi bonds

That overseas investors have been increasing their holdings of renminbi bonds for 32 consecutive months till July — according to China Central Depository and Clearing Co data — shows the Chinese bond market’s growing attractiveness.

The increasing popularity of renminbi bonds has much to do with China’s overall financial system being in good health and its market valuation having fewer bubbles.

Thanks to China’s sustainable development, the investment value of its financial assets and the further opening up of its capital market, foreign investors will continue to increase their renminbi bond holdings, and the Chinese bond market is expected to attract more overseas investors.

The Chinese economy has shown strong resilience against external pressures and still has huge potential. China was the only major economy to achieve positive growth last year. And in the first half of this year, it achieved 12.7 percent GDP growth.

China’s coordinated prevention and control measures in fighting the novel coronavirus outbreak, and its continuously expanding economy and steady economic recovery have given a solid start to its 14th Five-Year Plan (2021-25) for national economic and social development.

The Wall Street Journal, Japan’s Kyodo News and other foreign media outlets have all praised China’s economic performance this year.

China’s sound economic fundamentals, effective epidemic prevention and control measures, and continuous improvements in the balance of payment have all boosted market expectations for the appreciation of the renminbi and enhanced the attractiveness of renminbi assets.

Given the slow global economic recovery and the negative interest rate environment, the renminbi bonds with stable and relatively high yield are attracting more and more foreign investors.

The further opening up of China’s bond market and the broader capital market, and the shift from factor flow-based to rule-based market opening-up are key reasons for the increasing popularity of renminbi bonds.

As the Chinese bonds have been included in global mainstream bond indexes, foreign institutions find it more convenient to invest in the Chinese market through renminbi bonds.

With the further opening up of the financial market, China’s bond market will gain more popularity among global investors.