Aug 30, 2019 - World

The world is increasing its investment in Chinese markets

Data: Wind Information; Chart: Chris Canipe/Axios
Data: Wind Information; Chart: Chris Canipe/Axios

China's bond and equity markets have been slowly opening up to foreigners. They're now beginning to see fairly significant inflows that are growing much more quickly than foreign direct investment.

What's happening: Over the past 8 years, foreign investment in China's stocks and bonds has grown 6-fold to nearly $1.3 trillion, per Wind Information data shared by Seafarer Funds. And Americans are responsible for nearly half of that total, scooping up $535 billion worth of Chinese assets, with significant flows in recent months.

What they're saying: Nicholas Borst, director of China research at Seafarer Funds, writes ...

"A recent spate of reforms have led to a considerable opening of China’s capital account. Whether via the Stock Connect, the Bond Connect, the expansion of the Qualified Foreign Institutional Investor (QFII) program, or direct access to the interbank bond market, foreign investors have an unprecedented ability to buy and sell Chinese securities."
"Capital inflows into China have increased significantly, even amid the volatilities of its economy and stock markets."

Yes, but: The level of Chinese assets owned by American investors is still low compared to U.S.-based funds and even to other emerging markets, Borst tells Axios. The current level of investment represents less than 5% of total U.S. investor holdings.

  • "Consequently, it’s hard to argue that U.S. investors play an important role as a source of capital for domestically listed Chinese companies."

Go deeper: Chinese investment in the U.S. has dropped nearly 90% since Trump took office

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