China set for ‘steady, continuous’ foreign capital inflows as overseas investors return amid reopening

Foreign investors purchased a net US$12.6 billion of stocks and bonds in the first half of January, the State Administration of Foreign Exchange said

China faced capital outflow pressure last year amid its economic slowdown, aggressive US interest rate increases and Russia’s invasion of Ukraine

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China witnessed a recovery in capital flows last month due to a slower pace of US interest rate increases and Beijing’s pivot away from its zero-Covid policy. Photo: EPA-EFE

Published: 8:30pm, 18 Jan 2023Updated: 9:08pm, 18 Jan 2023

China is expected to see “steady and continuous” capital inflows this year after its reopening, as overseas investors increased holdings of onshore yuan assets in January.

Foreign investors purchased a net US$12.6 billion of stocks and bonds in the first half of January, having bought a net US$15.7 billion in December, according to the State Administration of Foreign Exchange (SAFE).

“In terms of the latest market data, foreign investment in the domestic securities market has been active recently,” said SAFE spokeswoman Wang Chunying on Wednesday.

China faced persistent capital outflow pressure last year amid its economic slowdown, aggressive US interest rate increases and market disturbances triggered by Russia’s invasion of Ukraine.

We have a foundation and conditions to keep a stable performance in foreign exchange market, and cross-border capital movement will become more stable

Wang Chunying

But it witnessed a recovery in capital flows last month due to a slower pace of US interest rate increases and Beijing’s pivot away from its zero-Covid policy.

The inflows were in line with the latest report from the Institute of International Finance, which said last week that foreign investors injected US$11.4 billion into Chinese stocks and bonds in the final month of the year, marking the second month in a row of inflows.