Foreign investors’ net cash flow to the Chinese market hit a record high of $334 billion in 2021, a yearly increase of 32 percent, which demonstrates a strong appeal of the Chinese economic prospect, the State Administration of Foreign Exchange (SAFE) said in a report on Friday.
United Nations Conference on Trade and Development ranked China as the second largest foreign capital inflow destination in the world in 2021.
The total increase in liabilities increased $661.6 billion in 2021, which mainly results from foreign direct investment and foreign investment in RMB assets, according to SAFE.
Foreign investment in Chinese securities increased by $176.9 billion, while the investment in derivatives decreased by $6.8 billion.
Foreign investors mainly go to Chinese bonds when it comes to securities investment. SAFE attributed the relatively stable RMB and the Chinese government bond being included in the FTSE Russell World Bond Index among the favoring factors to investors.
FTSE Russell, one of the three major international bond index providers, officially included Chinese government bonds into its flagship bond index product, the FTSE World Government Bond Index (WGBI) last October.
The JPMorgan Chase Global Emerging Market Government Bond Index and the Bloomberg Barclays Global Aggregate Bond Index successively included Chinese bonds in 2020 and 2019.
The overall yield of inbound investment in China was about 6 percent in 2021, while the yield of China’s investment outbound was about 2.8 percent, SAFE data showed.
“The difference in yield reflects the leading advantage of China’s economic fundamentals,” SAFE said in its report. SAFE will deepen the reform and opening-up in the field of foreign exchange to help stabilize China’s macro-economy and consolidate the foundation for a basic balance of payments in 2022, it said in the report.