BEIJING, Feb. 14 (Xinhua) -- China's bond market is expected to attract overseas investments totaling in a range between 750 billion U.S. dollars and 850 billion U.S. dollars in the coming five years, according to Liu Linan, a China fixed-income strategist at Deutsche Bank.
Liu predicted that in the next 20 months, the amount of overseas funds flowing into the domestic bond market will be about 120 billion U.S. dollars, of which 48 billion U.S. dollars will flow in before 2019.
The proportion of overseas investors' holdings in the domestic bond market will climb to 5.5-6 percent. In particular, the proportion of their holdings in Chinese government bond market will be 18-20 percent, while that in the policy bank bond market will be 8-10 percent, said Liu.
According to a special report on China's bond market published by Liu, in 2018, the global investors' net increase in RMB bond investments was 512 billion yuan (approximately 75 billion U.S. dollars). As of the end of 2018, overseas investors had held 1.7 billion yuan in RMB bonds, equivalent to 2 percent of the volume in the domestic bond market.
Given the earlier news that the Chinese RMB-denominated government bond and policy bank bond will be added to the Bloomberg Barclays Global Aggregate index and the global investment needs for asset allocation, Liu forecasted that the total capital inflow into the Chinese bond market in 2019 will rise from 550 billion yuan (about 80.6 billion U.S. dollars) to 600-700 billion yuan (about 87.9-102.5 billion U.S. dollars).
The report also pointed out that China's bond market has made significant progress in recent years, with lots of foreign investors setting foot in the market.
The report noted that since 2013, China's bond market has continued to expand its opening-up, and foreign investment in the domestic RMB bond market has been on the rise. At the end of 2013, the amount of domestic RMB bonds held by overseas investors was around 400 billion yuan, accounting for 1.2 percent of the total market. The figure had jumped t 1.71 trillion yuan at the end of 2018, accounting for 2 percent of the total market.
Currently, more than 760 overseas investment institutions have been active in China's fixed income market, of which about 10 percent are central banks or monetary authorities. Specifically, there are more than 500 overseas investment institutions registered under the Bond Connect program and the average daily turnover of bonds under the program in 2018 was 3.6 billion yuan, a year-on-year increase of 43 percent, said the report. (Edited by Hu Pingchao, hupingchao@xinhua.org)
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