Xing Huina:

Now the floor is open for questions. Please identify the news outlet you work for before asking your question.

Yicai:

Since the beginning of this year, overseas investors have continued to increase their net holdings of Chinese bonds. In addition, the recent domestic stock market rise has also attracted more foreign investment into domestic equities. What is SAFE's outlook toward future foreign capital allocation into renminbi assets? Thank you.

Li Hongyan:

Thank you for your question. China has continuously and steadily opened up its financial market, and foreign investment in China has always attracted attention. I'd like to share some updates on the current situation. Recently, foreign investment in RMB assets has witnessed a positive trajectory. The comprehensive yield of RMB bonds has remained robust this year, encouraging foreign investors to increase their holdings on RMB bonds. The total holdings of onshore RMB bonds by foreign investors have surpassed $640 billion so far, marking a historic high. In terms of the existing investment structure, central banks and commercial banks from abroad, known for their stable investment style, are the primary investors and their investment portfolio is weighted towards medium and long-term bonds, such as treasury bonds and bonds issued by policy-oriented banks, which contributes to a higher level of investment stability. Moreover, driven by the rise in domestic equities, foreign investors have been increasing their net purchases of domestic stocks since late September. This indicates foreign investors' enhanced appetite for RMB-dominated assets. At present, foreign investments in domestic capital markets are still in a nascent stage, with holdings of RMB assets accounting for 3% to 4% of the domestic stock and bond markets. There is room for further increase given a multitude of favorable factors.

First, the fundamentals of China's economy are stable and improving, which provides a favorable macro-environment. Since the beginning of this year, China has been promoting its high-quality economic development in an orderly manner. As a number of incremental policies take effect one after another, China's economy will continue to consolidate this long-term positive trend. 

Second, China's improved high-level opening-up has provided a favorable policy environment. In recent years, China has steadily opened its financial market to global investors, providing a diverse range of investment channels for foreign investors. Programs such as the Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect, the Bond Connect program and the China Interbank Bond Market (CIBM) have provided diversified investment channels for foreign investors. The third plenary session of the 20th CPC Central Committee made important arrangements with promoting high-level opening-up in the financial sector. As relevant policies continue to take effect, the domestic capital market is expected to be more attractive to foreign investors. 

Third, renminbi assets can effectively achieve risk diversification through diversified asset allocation measures, offering sound value of investment. China has established a comparatively complete and in-depth financial market system. The size of the country's bond and stock markets rank second worldwide. The renminbi maintains a stable value, boasts a variety of asset categories and demonstrates relatively independent yield performance on a global scale. This is conducive for global investors to diversify their asset allocation and achieve risk diversification. In the meantime, the share of renminbi used in global cross-border transactions continues to rise steadily and renminbi's international influence is gradually strengthening, making it a vital option for global investors seeking diversified asset allocation.

Overall, holdings of renminbi assets by foreign capital help to diversify the participants in the domestic market, enhance market liquidity and promote a more active and international development of the domestic capital market. SAFE will continue to enhance investment facilitation, foster a favorable investment environment, promote high-quality financial opening-up and proactively support foreign investors' participation in the domestic capital market. Thank you.