Over the past two years, there has been a lingering question: during the US dollar interest rate hike cycle, do foreign investors favor China or bearish on China? Are foreign funds fleeing or returning to bottom-fish?

This question was surprisingly answered at the recent Lujiazui Financial Conference, where the central bank released a piece of data that made many jump. Wasn't it said that foreign capital is fleeing China on a large scale? What's going on?

These two days, an important conference is being held in Lujiazui, Shanghai, where much information has been gradually revealed before, but there is one piece of data that we did not know before but is very important.

On June 19th, at the Lujiazui Financial Conference, Zhu Helin, Deputy Governor of the People's Bank of China and Director of the State Administration of Foreign Exchange, delivered a keynote speech, in which he announced an important data.

He said that by the end of May, more than 1100 institutions from over 70 countries and regions have entered China's interbank bond market, with foreign capital holding a total of 4.3 trillion yuan in China's bond market, with an average annual growth rate close to 20% over the past five years.

Advertisement

4.3 trillion yuan, plus an average annual growth rate close to 20%! This scale of foreign capital holding bonds can defeat the vast majority of countries in the world, and the average annual growth rate is far ahead of the GDP growth rate.

This indicates that despite the epidemic in the previous years, despite the unsatisfactory economic recovery after the epidemic, and despite everyone shouting that our debt is too high in the past two years, foreign capital is still continuously increasing its holdings of Chinese bonds. What's going on?

In fact, the world today is an era of global debt, and the global debt scale has reached a very terrifying level.

In February this year, the Institute of International Finance released a report stating that the global debt level in 2023 was as high as 313 trillion US dollars.

According to data from the International Monetary Fund, the global nominal GDP in 2023 was 104.8 trillion US dollars, and the global debt was 298.7% of the annual GDP!So some say that the current global GDP is a false prosperity borrowed through debt.

A significant portion of this debt is usurious loans extended by international financial oligarchs to the world.

In other words, the world has essentially "sold" itself to international financial oligarchs. The hard work of 8 billion people worldwide for a year is not enough to repay their debts.

Additionally, on June 4th, the United Nations Conference on Trade and Development released a report stating that global public debt reached an all-time high in 2023, amounting to $97 trillion, an increase of $5.6 trillion from 2022.

What is public debt? It can essentially be understood as the debt borrowed by governments.

When it comes to borrowing, the United States leads the world, with its national debt reaching $34.7 trillion, accounting for 35.8% of global public debt.

This means that one-third of the global public debt is borrowed by the U.S. government, borrowing heavily from others to develop itself—how could the United States not be prosperous?

Let's also look at the government debts in Europe: France has approximately €2.46 trillion, Italy €2.25 trillion, Germany €2.01 trillion, Spain €1.25 trillion, and the United Kingdom £2.65 trillion; everyone has borrowed a lot of money.

To be frank, Western countries have democratically elected leaders who serve for only a few years. They don't care how much money the government borrows, as long as they can spend it comfortably during their term.

Therefore, in today's world, everyone is borrowing money. If we understand it in reverse, purchasing someone else's bonds is lending money to them, which is an investment and a very popular one globally.In this context, there are certain investment institutions and wealthy individuals around the world who have a particular preference for investing in bonds, especially those issued by governments. So, whose bonds would they choose to invest in?

The current situation is that the global economy is not doing well. U.S. Treasury bonds, once the most popular, now appear to have significant issues, and many people are hesitant to invest. European government bonds are also in a poor state, with some countries even facing debt crises.

It goes without saying for bonds from other countries. For instance, Japan, being an economic powerhouse, has its government bonds predominantly purchased by the Bank of Japan.

Although China also has a substantial amount of debt, the scale of its government bonds is relatively low. In recent years, China has been working hard to mitigate debt risks, and the overall risk remains controllable.

More importantly, China is one of the world's top economic powers. The stability, vitality, and growth rate of its economy, as well as the government's creditworthiness, are all noteworthy.

Given the global situation is not very optimistic, China appears to be more stable. Therefore, it is only natural for bond-favoring investors to increase their investment in Chinese bonds.

Understanding this perspective, the scale and growth rate of foreign holdings of Chinese bonds in the coming years will, to some extent, reflect the true state of China's economy, or at least the foreign view of China's economy.

We can anticipate that in the next few years, as China's economy continues to improve, this figure will continue to grow.