Overseas investors’ holdings of Chinese bonds topped 1 trillion yuan for the first time in August

The value of Chinese government bonds held by offshore investors exceeded 1 trillion yuan (US$146.26 billion) for the first time in August as regulators moved to improve access to the world’s third-largest bond market.

Investors outside mainland China boosted their Chinese government bond positions by 53.9 billion yuan in July to 1.03 trillion yuan, according to Reuters’ calculations based on data from China Central Depository and Clearing Co (CCDC), the country’s primary bond clearing house.

August marked the 18th consecutive month of increases in offshore holdings, and brought the proportion of outstanding Chinese government bonds held by offshore institutions to a record-high 8.0 per cent.

The steady rise in global interest in Chinese bonds comes alongside easier access to its interbank bond market, and as regulators have instituted tax incentives for foreign investors.

China’s cabinet said in late August that foreign investors would be exempt from enterprise or value added taxes on interest income earned in the domestic bond market for three years.

Reuters reported on August 24 that China had implemented real-time delivery-versus-payment (DVP) settlement for transactions through its Bond Connect scheme, cleared through CCDC.