Chinese bonds held by foreign institutional investors reached nearly 2.2 trillion yuan (about $0.3 trillion) in 2019. Experts point out that the lure of the Chinese bond market is gradually being discovered by international investors and the trend of China becoming a hot destination for global investment will not change in 2020.

(Photo/Xinhua)

China's bond market has become increasingly open and accessible to foreign investors, winning over many international investors as the volume of negative interest rate bonds around the world continues to set new records.

Among the Chinese bonds bought by foreign institutions, government bonds are the most popular. Data showed that as of December 2019, foreign investors held 1.3 trillion yuan in government bonds, accounting for 69.7 percent of the total.

And foreign institutions have reduced their holdings of other types of bonds, such as national debt, agricultural development bonds and import and export bank bonds; their holding of local government bonds, corporate bonds and others have seen little change.

"From the perspective of China's overall bond size, the proportion of national debt is still low and has great potential in the future," said Zong Liang, chief researcher of the Institute of International Finance at Bank of China.

Zong added: "We hope to see the emergence of high-quality, high-grade bonds equivalent to national debt, which will become the main investment target of foreign investors, providing them with high-yield varieties and opportunities to share the benefits of the Chinese market."

The combination of attractive interest rate differentials, a stabilizing renminbi exchange rate, a series of liberalization measures and increasing access has made China's bond market a hot investment destination.

"China's bond yields are high; international investors are interested. China also has an open attitude, and there are several other factors as well," Zong said.

With the growth of China's economy and the gradual improvement of the pattern of financial opening-up to the outside world, China's bond market has become an important place for global capital allocation, according to Li Yang, Chairman of the National Institution for Finance & Development (NIFD).

The trend of China's bond market becoming a hot destination for global investment will not change for some time to come.