China expects long-term capital inflows to return despite recent volatility

Rainforest Resources

07/04/2022 08:59

SHANGHAI, April 7 (Reuters) - China's currency regulator
expects foreign investments in yuan-denominated assets to
increase over the long run, despite recent fluctuations,
financial media outlet Caixin reported on Thursday.
    The remarks came as foreign investors trimmed their holdings
of Chinese government bonds at the fastest rate in three years
in February, while major economies including the United States
tightened monetary policy, prompting market concerns about
higher capital outflows and yuan depreciation. urn:newsml:reuters.com:*:nL5N2V71QO
    "Short-term fluctuations in cross-border securities
investments do not mean a reversal of the long-term trend of
foreign investment into China's capital market," the State
Administration of Foreign Exchange (SAFE) was quoted as saying.
    "Affected by recent changes in the external environment,
fluctuations of foreign investments in domestic stocks and bonds
have increased, (but) it is normal under the complex
international economic and financial situation."
    The foreign exchange regulator added that cross-border
capital flows under the financial account remained normal and
within control, while the value of the Chinese currency was
stable.
    A number of foreign investment banks and research
institutions pointed out heavier capital outflows from China
after the start of Russia's invasion of Ukraine.
    "Outflows from China on the scale and intensity we are
seeing are unprecedented," analysts at the Institute of
International Finance said in a note in late March.
    Data showed that foreign investors sold more than 45 billion
yuan ($7.08 billion) on a net basis through the Stock Connect
scheme in March, booking the biggest monthly outflow in nearly
two years.
    Separately, Guan Tao, global chief economist at BOC
International and a former senior SAFE official, said the
regulator has experience in handling such currency fluctuations
should conditions worsen.
    He wrote in a government paper published on Thursday that
the private sector could play a role in cushioning the impact of
such volatility on international payments.

($1 = 6.3601 Chinese yuan)

 (Reporting by Winni Zhou and Andrew Galbraith; Editing by Sam
Holmes)
 ((winni.zhou@thomsonreuters.com; +86 21 2083 0100; Reuters
Messaging: winni.zhou.thomsonreuters.com@reuters.net))