Chinese assets are still attractive to investors despite pressure from interest rate hikes by the U.S. Federal Reserve, China’s top banking regulator said Friday.
While the nominal interest rate gap between China and the United States narrowed because of the recent Fed rate hike, the real interest rate in China is still much higher than that in the United States. It adds to the attractiveness of yuan assets, said Ye Yanfei, an official with the China Banking and Insurance Regulatory Commission.
The Fed raised its benchmark interest rate in mid-March to rein in surging inflation. Officials have been hinting at more aggressive rate hikes later this year to tame inflationary pressure.
While such moves may trigger capital inflow into U.S. assets in the short term, whether the short-term rates could remain high is still in doubt as an inverted yield curve usually signals dimming economic prospects, Ye said.
On the other hand, Chinese assets will gain more attractiveness as the economy further grows and people’s income rises, Ye said. He added that potential appreciation in the yuan in the long term and stable sovereign credit ratings would make yuan assets more sound investments.
“Investing in China is investing in the future. If you want to invest in the future, China is the country to be in,” Ye said.