Chart of the Day: Overseas Investors Curb Buying of China’s Yuan-Denominated Bonds

Offshore holdings of domestic yuan-denominated bonds grew at a slower pace in September amid a 19-month streak of increases, according to one of the country’s major clearing houses.

Foreign institutions upped their holdings of yuan-denominated bonds by 30.2 billion yuan ($4.35 billion) in September, the smallest monthly increase since March. In June, July and August, such holdings grew by 87.1 billion yuan, 58.2 billion yuan and 58 billion yuan respectively from the previous month, according to Caixin calculations based on data from China Central Depository and Clearing Co. Ltd.

As of September, foreign institutions held 1.44 trillion yuan worth of yuan-denominated bonds, up by 468.2 billion yuan since December.

Banking regulators have introduced a raft of measures to lure offshore money to the domestic bond market. China’s cabinet in August announced that foreign institutions will be exempt for the next three years from paying corporate income tax and value-added tax on interest from Chinese bonds.

The launch of a bond connect program last year also allows eligible offshore investors to trade and settle mainland bonds through a Hong Kong-based custodian and clearing service.

Contact reporter Timmy Shen (hongmingshen@caixin.com)