China Securities Market Hits Three-Year High in FDI

Foreign investment in yuan assets maintained strong momentum in the first quarter of 2024, with net foreign investment in China’s securities market reaching its highest level in three years, official data revealed.

According to Wang Chunying, spokesperson for the State Administration of Foreign Exchange (SAFE), China maintained a basic balance in international payments during Q1 2024. The country saw a net increase of $138.9 billion in financial assets, with cross-border investments continuing to develop steadily.

The net inflow of foreign investment into China grew significantly, with financial liabilities increasing by $64.5 billion. Specifically, the net inflow of overseas investment into China’s securities market totalled $32.2 billion, reflecting the strong appeal of yuan-based assets among international investors.

Wang Chunying attributed this growth to China’s high-quality development and the continuing rebound and stabilisation of its economy, which helps maintain a basic balance in international payments.

Despite the favourable domestic conditions, the global economic environment remains complex and challenging. While inflation has eased from its peak, it remains high, leading to divergent growth and monetary policies among major economies, as discussed by the Monetary Policy Committee of the People’s Bank of China (PBC) during their quarterly meeting in Beijing.

The PBC noted that while China’s economy continues to recover and high-quality development progresses, challenges such as weak consumer sentiment and lack of effective demand persist. The central bank emphasised the importance of targeted monetary policies, countercyclical adjustments, and leveraging monetary policies to expand domestic demand and revive consumer confidence.

To support key strategic sectors and address weak links, the PBC plans to accelerate the development of new quality productive forces. Additionally, the central bank aims to enhance financial support for the renewal of commercial equipment and the trading-in of consumer goods.

The PBC also intends to bolster the real estate market by implementing financial policies that meet residents’ expectations for quality housing and promote healthy market development. This aligns with China’s broader economic strategy and pre-set annual GDP growth target of around 5 percent for 2024.

Hu Yifan, regional chief investment officer and head of macroeconomics for Asia-Pacific at UBS Global Wealth Management, expressed optimism about China’s economic resilience. Hu highlighted notable growth in the service consumption sector, particularly in travel, transport, and catering. He also forecasted a rebound in China’s auto consumption in the second half of the year.

In the property market, recent regulatory policies are expected to stimulate market activity, further supporting China’s economic goals for 2024.