RMB assets show bigger appeal for global investors

BEIJING－Renminbi-denominated assets remain a strong magnet for international investors amid sound long-term prospects and China's continuous efforts to open its financial market.

More than 60 percent of surveyed overseas financial institutions will increase their holdings of RMB-denominated assets, a recent white paper from the Bank of China said, citing a survey covering over 3,400 enterprises and institutions globally last year.

The proportion increased by 9 percentage points compared with the 2020 survey, the white paper said.

Echoing the white paper, official data have revealed that global investors showed increasing interest in pursuing RMB-denominated assets to diversify their investment portfolios over the past few years.

From 2018 to 2021, total net increase in holdings of domestic stocks and bonds by global investors exceeded $700 billion, with an annual growth rate of 34 percent, data from the State Administration of Foreign Exchange showed.

"Global investors' allocation in China's A-share market in 2022 is expected to continue the momentum in recent years," said Fang Xinghai, vice-chairman of the China Securities Regulatory Commission, noting the resilience of foreign investment in the country's capital market.

The accessibility of China's equity market has greatly improved recently, as the country ramped up efforts to upgrade the Shanghai-Hong Kong and Shenzhen-Hong Kong stock connect schemes and promote the steady increase of A shares' proportion in global equity indexes, among other measures.

To date, the net inflows of foreign investment into the A-share market via the two stock connect schemes have topped 1.6 trillion yuan ($240 billion).

China has also made remarkable progress in opening up its bond market.

As the world's second-largest bond market, China's bond market saw 1,035 overseas institutional investors hold a total of 3.9 trillion yuan in bonds by the end of April, surging 225 percent from the end of 2017, central bank data showed.

Last month, Chinese authorities announced measures to support qualified overseas institutional investors that were investing directly or through connectivity in the exchange bond market, and independently choosing trading venues, marking the latest move to open the bond market.

"Extending the market access for qualified overseas institutional investors to the exchange bond market will help drive overseas investors to increase holdings of China's bond products," said Qiu Yilin, a researcher with the Bank of China Research Institute.

There is still much room for foreign investors to further increase their holdings of RMB assets, Wang Chunying, deputy head of China's forex regulator, has said.

RMB accounts for only 2.79 percent of global forex reserves and foreign investors' holdings in China's stock and bond markets stand at a relatively low level of 3 percent to 5 percent.

The global community continued to show recognition and confidence in the Chinese financial market, as the International Monetary Fund lifted the weighting of RMB in the Special Drawing Rights currency basket from 10.92 percent to 12.28 percent in May.

The rise of RMB's weighting indicates that the RMB is playing an increasingly important role in international payments and settlements, reserves, investment and financing, said Zhou Maohua, an analyst with the China Everbright Bank, adding that RMB internationalization is accelerating.

Xinhua