The holdings, $3.69 trillion as of June 30, had shrunk the most on record in January-through- March as money left the country and the central bank bought yuan to stabilize the yuan’s exchange rate.
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The central bank announced Tuesday that effective immediately, certain foreign institutions-including central banks, sovereign-wealth funds and worldwide financial institutions such as the World Bank-will have open access to the interbank debt market where the vast majority of bonds are traded.
Liu Li-Gang, an analyst with ANZ, believes that the drop is to be expected considering that the Renminbi’s value has increased compared to the USA dollar during the second quarter of 2015. “They also mean China’s economy may stabilise in the coming months”.
China’s economy expanded 7.0 percent year-on-year in the first quarter, slumping to a post-global financial crisis low, despite Beijing taking policy steps to bolster growth. “The amount of capital fleeing China declined in the second quarter as the yuan remained stable”, said Banny Lam, co-head of research at Agricultural Bank of China worldwide Securities.
Total social financing – a broader measure of credit in the economy – reached 1.86 trillion yuan last month, it said, up from 1.22 trillion yuan in May.
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New yuan loans accounted for 74 per cent of the TSF in the first half of this year, corporate bonds 11 per cent, entrusted loans 6 per cent, and stock issuance 5 per cent, the data showed. The PBOC has moved to combat the economic slowdown, cutting benchmark interest rates four times since November and lowering banks’ reserve requirement ratio twice since February. Bank cash reserves have also been reduced in order to encourage more China bank lending activities.
