Tags: investors | china | bonds

Offshore Investors Lift Holdings of China Bonds to Record $160.27 Billion

map of china with yuan
(Dollar Photo Club)

Monday, 07 January 2019 11:17 AM

Foreign investors' holdings of Chinese government bonds, which declined in November, rose to a record level last month as the yuan stabilized amid a temporary truce in the trade war between the United States and China.

Data from the China Central Depository and Clearing Co (CCDC) on Friday showed that total offshore holdings of Chinese treasury bonds were 1.097 trillion yuan ($160.27 billion) at the end of December.

That was a record, according to Reuters calculations, and 81 percent higher than the year-earlier figure. The total was also 36.5 billion yuan higher than at the end of November.

November's decline, the first in 21 months, came at a time of high yuan volatility.

The yuan strengthened 1.25 percent against the U.S. dollar in December, helped by easing worries over global trade as China and the U.S. agreed on a 90-day pause in new hostilities in their trade war.

December also saw a strong rise in offshore holdings of bonds issued by China's policy banks - China Development Bank, the Export-Import Bank of China, and Agricultural Development Bank of China. The banks disburse loans to support government policy.

While CCDC data no longer breaks down offshore holdings by individual bank, Reuters calculations show that total policy-bank bond holdings by offshore investors rose by 10.7 percent to 362.37 billion yuan, also a record high.

That increase, the strongest since September 2016, was helped by the clarification in late November of a tax waiver that makes policy-bank bonds more attractive to offshore investors.

For the first time, CCDC has also released data on Chinese local government bonds held by offshore investors, showing total holdings of 2.51 billion yuan at the end of December.

That is less than 0.2 percent of all offshore bond holdings for which CCDC provides data, and just 0.01 percent of the value of all outstanding local government bonds, according to Reuters calculations.

CCDC data covers about three-quarters of all Chinese onshore bonds. December data from Shanghai Clearing House, which covers debt instruments such as medium-term notes and negotiable certificates of deposit, and accounts for roughly 20 percent of the market, was not yet available Monday afternoon. ($1 = 6.8449 Chinese yuan)

© 2019 Thomson/Reuters. All rights reserved.

   
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Foreign investors' holdings of Chinese government bonds, which declined in November, rose to a record level last month as the yuan stabilized amid a temporary truce in the trade war between the United States and China.
investors, china, bonds
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2019-17-07
Monday, 07 January 2019 11:17 AM
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