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FTSE Russell China Bond Research Report

Highlights from the February report

• In 2016 the RMB declined 6.5 percent against the US dollar, marking its biggest fall since 1994 as a slowdown in macroeconomic growth took hold. At the same time, China saw a surge in capital outflows as companies and market participants sought protection from the declining currency. Roughly $760 billion left China in the first 11 months of 2016.

• Domestic bond issuance is down due to the sliding RMB and tighter credit markets. China onshore bond issuance as of December 23 by Chinese companies and banks was 142 billion RMB ($20.4 billion) less than the amount of notes they were due to repay in December -- the biggest monthly gap on record.

• Despite these developments, foreign institutions raised their holdings of all types of Chinese debt by 21.9 billion RMB in December to 778.85 billion RMB, according to data from the Central Depository and Clearing Co.

• China’s state banks and policymakers are trying to limit further outflows and alleviate pressure on the RMB. Bank of China, for example, is putting limits on corporate customers’ ability to purchase foreign exchange in Shanghai; and the State Administration of Foreign Exchange (SAFE) is investigating transfers abroad of $5 million or more, down drastically from $50 million in the past.

{Download the complete report}