China to lure more foreign investment in bonds, stocks

BEIJING (REUTERS) – China aims to attract more foreign investment in its bonds and stocks as the country further opens up its capital markets, the foreign exchange regulator said on Thursday (April 18).

There is significant room for foreign investors to buy Chinese bonds and stocks given their holdings of such instruments accounted for just 2-3 per cent of the total, Wang Chunying, spokesman for the State Administration of Foreign Exchange (SAFE), said in a news conference.

“China will become an important destination of diversified asset allocation for global investors in the future, under the policy of further opening up and facilitation,” Ms Wang said.

Overseas institutions bought a net U$9.5 billion in Chinese bonds and a net U$19.4 billion in listed Chinese stocks in the first quarter of 2019, she said.

Ms Wang also said China will improve channels for opening up its interbank bond market and develop the panda bond market.

Commenting on the US Federal Reserve’s policy stance, she said it will be favourable for the nation’s capital flows, and expects the cross-border capital flows to remain steady despite some uncertainties.

The Fed recently called a halt to further rate hikes over this year in the face of rising global economic risks, in turn putting a dent on the dollar.

Ms Wang said China will ensure safety of its forex reserves, reaffirming a pledge to improve the yuan regime as well as the flexibility of trading in the currency.

Chinese commercial banks sold a net U$9.1 billion of foreign exchange in the first quarter, the regulator said, adding the nation’s current account is likely to maintain a surplus in the first quarter of the year.

China’s cross-border capital flows are expected to remain steady this year, helped by the government’s growth-supportive policies, Wang said.

China’s economy grew at a steady 6.4 per cent pace in the first quarter, defying expectations for a further slowdown, as industrial production jumped sharply and consumer demand showed signs of improvement.

China reported a current account surplus of U$49.1 billion in 2018, SAFE data showed last month.

The OECD said in a report on Tuesday that China’s current account may swing to a deficit of 0.1 per cent of GDP this year from a small surplus in 2018, amid its rebalancing towards domestic demand.

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