SHANGHAI Jan 4 Foreign investors increased
their stakes in China's government bonds for a 14th straight
month in December, and their holdings at the end of 2016 were 70
percent above the year-earlier level.
Overseas institutions raised their holdings by 6.9 billion
yuan ($992.03 million) last month, bringing the total to 423.7
billion yuan, according to Reuters calculations based on data
from the official bond clearing house.
At the end of 2015, foreign holdings of Chinese treasury
bonds were 248.4 billion yuan.
Holdings of Chinese debt rose in 2016 "as authorities have
eased the restrictions and welcome foreign capital flowing into
the country," said a Beijing-based trader at a Chinese bank.
Beijing opened up its interbank bond market to more types of
foreign investors in February 2016 and relaxed foreign exchange
repatriation rules in May.
Some traders said China's official inclusion in the
International Monetary Fund's reserve basket, known as Special
Drawing Rights, on Oct. 1 also boosted foreign interest.
Low-risk government bonds were among the favorites by
overseas investors, who expanded their portfolios to purchase
more government-backed Chinese policy bank bonds in December,
according to data from the Central Depository and Clearing Co.
Foreign buying of policy bank bonds in December increased by
12.6 billion yuan from November, when it decreased 1.6 billion
yuan from the previous month, official data showed.
Chinese policy bank bonds are issued by the China
Development Bank, the Agricultural Development Bank of China,
and the Export-Import Bank of China.
Overall, foreign institutions raised their holdings of all
types of Chinese debt by 21.9 billion yuan in December to 778.85
billion yuan, data from the Central Depository and Clearing Co.
For 2016, foreigners purchased 176.2 billion yuan of all
types of Chinese bonds.
Some traders said the rapid increase in foreign holdings may
not be sustainable this year as some were concerned that the
government would unveil more measures to curb capital outflows.
The Chinese authorities rolled out policies over the past
two months to tighten their grip on cross-border cash flow
overseas after the yuan slid to 8-1/2 year lows.
A sliding yuan also dampened interest in yuan-denominated
assets, but Chinese yields remained attractive compared with
similar U.S. notes.
On Wednesday afternoon, the yield on China's benchmark
10-year government bonds was 3.146 percent compared
with around 2.47 percent for the U.S. notes.
($1 = 6.9554 Chinese yuan)
(Reporting by Winni Zhou and John Ruwitch; Editing by Richard