Since last year, many people have been singing about China, saying that foreign capital is fleeing China on a large scale, and the central bank has recently slapped the latest data in the face.
The data shows that since the fourth quarter of 2023, foreign institutions have begun to increase their holdings of China's onshore bonds, what is the motivation for this?
On April 18, the State Administration of Foreign Exchange disclosed a very important data at the press conference on financial operations and foreign exchange receipts and payments in the first quarter of 2024.
Since the fourth quarter of last year, foreign institutions have begun to increase their holdings of China's onshore bonds on a large scale.
For the whole of 2023, the net increase in holdings will only be $23 billion, and the net increase in the first quarter of this year has reached $41.6 billion.
As of the end of March this year, 1,129 foreign institutions from more than 70 countries and regions had entered China's bond market.
At present, foreign holdings have exceeded US$570 billion, accounting for about 2.6% of the total domestic bond custody.
570 billion US dollars, about 4 trillion yuan, which is a lot of money.
Why did foreign institutions suddenly increase their investment in Chinese bonds, and what kind of bonds did they invest in?
The State Administration of Foreign Exchange believes that first, the macro environment is supportive, second, the investment value is guaranteed, and third, there is demand for global allocation.
The RMB exchange rate is relatively stable, and RMB assets have a relatively independent asset income performance in the world, which helps foreign investors diversify risks.
According to the State Administration of Foreign Exchange, foreign central banks, banks and other financial institutions have increased their holdings of domestic bonds in an orderly manner, and mostly invested in medium and long-term bonds such as treasury bonds and policy financial bonds.
This kind of long-term bond has a low yield, but good credit and little risk, and has a very obvious safe-haven attribute.
Is this the possibility of foreign capital coming to China to take refuge in risk?
In the past two years, the global economic recovery has encountered challenges, and many people have forgotten that among the world's relatively large economies, China's economic growth rate is relatively fast.
At the same time, China's economy is one of the safest and most stable economies in the world, with solid fundamentals, stable operation and effective risk control. This is very rare in today's volatile economic environment in the world.
With the US dollar raising interest rates and global economic growth encountering challenges, there is not much safe place for capital investment.
Recently, the yen has been shorted on a large scale, and major Asian currencies have encountered a wave of depreciation, but the yuan is as solid as a rock.
What's more, these Chinese bonds are high-quality assets.
What is behind bonds? Many people misunderstand that bonds are all garbage, and this is all influenced by the poison of junk bonds in the United States, thinking that the whole world is full of junk bonds.
Unlike the large number of junk bonds derived from the US finance, China's bonds are relatively rigorous, and often only high-quality assets are allowed to issue bonds.
The main buyers of bonds are still the Chinese people, and we can't fool the people.
Therefore, Chinese bonds correspond to a large number of our high-quality assets, and many of our infrastructure and urban livelihood projects.
In short, it is very normal for foreign institutions to be optimistic about Chinese bonds.
However, the sudden and large increase in Chinese bond holdings by foreign institutions is also an event that we need to be wary of.
Many of us are not vigilant enough about the methods of American financial capital, believing that the so-called harvest is a conspiracy theory.
As a matter of fact, as the world's only financial superpower, the United States has an unimaginable degree of development of its financial industry, abundant means, and black hands.
At the same time, there is still a certain risk in our debt itself, which also leaves them with a chance to get their hands dirty.
Since last year, many people have said that the debt crisis is a bigger mine than real estate, and although we have taken proactive measures to prevent risks, the scale of debt is still large and the risks still exist.
At this time, if foreign institutions premeditately attack the bond market, it is very likely to set off a big storm.
There is also an important risk factor in this, foreign capital is often the first downgrade of the rating by the rating agency, and then the capital is shorted, and then the large-scale public opinion is sung down and the crisis is exaggerated.
China is a country with a large population, many people are irrational in investment, and there are many people who blindly follow, and it is possible to cause big waves when there is a stir, and it will be difficult to control the direction of public opinion.
Of course, we must not be overly nervous, let alone choke on food, but should create a high-quality investment environment, expand the opening up of China's bond market, and make it more convenient for foreign investors to participate.
At the last moment of the US dollar interest rate hike, the global capital market is in turmoil, the undercurrent of the great power game is surging, and some regions are full of dangers.
In this environment, it cannot be ruled out that some foreign capital forces may take risks, so it is always right to be vigilant and take precautions.