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The week in renminbi: China bonds make index, two foreign banks to set up onshore securities JVs, PMI rebounds

By Rebecca Feng
01 Apr 2019

In this round-up, Chinese government and policy bank bonds are included in the Bloomberg Barclays Global Aggregate Index, JP Morgan and Nomura win permission to set up securities JVs and China’s Purchasing Managers’ Index (PMI) rebounds from a three-month low.

China’s government and policy bank bonds will be included in the Bloomberg Barclays Global Aggregate Bond Index from Monday. The debt, mostly in renminbi, will be phased into the index over a 20-month period.


Nomura and JP Morgan received the go ahead on Friday from the China Securities Regulatory Commission (CSRC) to establish securities joint ventures in China.

Nomura said it would set up its new company once it had completed “procedural requirements”.

The Japanese bank’s new Shanghai-based company, Nomura Orient International Securities Co, will initially focus on providing wealth management services to high net-worth individuals in China before expanding into wholesale and other business areas.

“We will be actively facilitating the opening up of the capital markets,” said the regulator.


Chinese PMI rebounded to 50.5, ending a three-month period where it languished below 50, according to data published on Sunday by the National Bureau of Statistics.

Large enterprises PMI fell from 51.5 to 51.1 while medium and small enterprises PMI rebounded to 49.9 and 49.3; a three and four point increase from the month before, respectively. The new orders sub-index increased to 51.6, a one point increase from March.

High-tech manufacturing and consumer products manufacturing PMI reached 52 and 51.4 respectively.

“This jump will likely provide a big boost to stock markets, and thus could delay a reserve requirement ratio cut,” Ting Lu, an economist at Nomura, said on Monday. “However, the rise in the March PMI and incoming activity data could be partly the result of the lunar new year holiday distortion and the anti-pollution campaign.”

“The strong PMI data is likely to repel the concern about the sharp slowdown in China,” Tommy Xie, an economist at OCBC Bank, wrote in an April 1 note. “The Chinese economy may try to search the bottom in the near term on the back of proactive fiscal policy and more flexible monetary policy.”


The US and China wrapped up a full day of trade talks on Friday in Beijing. China’s vice-premier Liu He will head to Washington DC next week to continue the negotiation, according to a report by state media agency Xinhua which was subsequently republished by the government.

According to the report, the discussion focused on “the actual text of the deal.”

The US wanted to make sure that there was no discrepancy in the English and Chinese language versions of the deal text, officials said, according to Bloomberg.

The White House later released a statement on Friday saying both sides “continued to make progress during candid and constructive discussions on the negotiations and important next steps.”

However, Trivium, a consultancy, said the possibility of a deal was decreasing.

“The Chinese side will not sign any deal in which they look to be subservient to the US,” it said. “Top of mind for all Chinese leaders – and citizens – are the series of ‘unequal treaties’ that China was forced to sign with colonial powers in the 19th century.”


By the last quarter of 2018, the amount of renminbi assets held by central banks as FX reserves reached $202.8bn, taking up 1.89% of overall reserves and marking the highest level since October 2016, according to the International Monetary Fund.

Renminbi reserves surpassed those held in both Australian and Canadian dollars in the fourth quarter.

In the same period, US dollar and euro reserves took up 61.69% and 20.69% respectively of a total of $10.73tr allocated FX reserves. 


The amount of onshore securities held by foreign investors in 2018 reached $160.2bn, a 29% increase from the year before, according to data published on Saturday by the State Administration of Foreign Exchange (Safe).

Foreign investors ploughed $60.7bn into Chinese stocks and $99.5bn into onshore bonds, marking a 70% and 13% annual increase, respectively.  

Foreign institutional investors invested $96.2bn in China’s securities markets, a 79% increase from 2017. Most of the inflows were in the form of foreign central banks’ increasing their holdings of Chinese government bonds.

The two Stock Connect schemes, between Hong Kong and Shenzhen and Hong Kong and Shanghai, recorded a total of $44.7bn of inflows, an 80% increase.


China held a total of $1.965tr foreign debt in 2018, according to data published on Friday by Safe. This was a 12% increase from 2017.

There was a 16% increase in China’s renminbi-denominated foreign debt holdings, higher than the 10% increase in its foreign currency-denominated foreign debt holdings. China’s medium to long term foreign debt investments grew 13%, higher than the 11% growth rate of its holding of short-term foreign debt.

By Rebecca Feng
01 Apr 2019