International investors buy Chinese assets at record pace

Global holdings of Chinese stocks and bonds have surged about 40 per cent to more than $800bn over the past year as investors bought assets at a record pace in spite of tense relations between Beijing and the international community.

Beijing and Washington have clashed over issues from corporate audits to China’s repression of Uyghurs in Xinjiang province, which the US has labelled genocide. It has also coincided with a crackdown by Beijing on Chinese listings in US capital markets, including a probe into data security at ride-hailing group Didi Chuxing announced just days after its $4.4bn New York listing.

Offshore investors have bought a net $35.3bn of Chinese stocks in the year to date via trading platforms that link Hong Kong with exchanges in Shanghai and Shenzhen, according to Financial Times calculations based on Bloomberg data. That was about 49 per cent higher compared with a year earlier.

Foreign investors have also bought more than $75bn in Chinese Treasuries in the year to date, according to figures from Crédit Agricole, representing a 50 per cent rise from a year earlier.

Foreign buying of Chinese stocks and government bonds has risen at the fastest rate ever compared with corresponding periods in previous years. Enthusiasm for Chinese assets has been fuelled by the country’s swift rebound from the Covid-19 pandemic but concerns are surfacing that its economic growth is slowing. “Contrary to the geopolitical rhetoric, from an asset management point of view you cannot avoid looking at the Chinese market,” said Andy Maynard, a trader at investment bank China Renaissance.

Inflows to Chinese markets have surged in recent years, partly because of the inclusion of renminbi assets in global stock and bond indices that are tracked by trillions of dollars’ worth of assets. In March, FTSE Russell became the latest indices provider to confirm plans to include Chinese government debt in its global bond index, a move that Nomura has forecast will funnel more than $130bn into China.

Bond inflows this year have taken total foreign holdings to about Rmb3.7tn ($578bn), say FT calculations based on data from Crédit Agricole and Hong Kong’s Bond Connect programme, a conduit for offshore investors to trade debt issued in the mainland.