As global markets remain unstable, foreign investors are turning to Chinese debt instruments as a safe haven. The demand for negotiable certificates of deposit (NCDs), issued between banks, is rising due to favorable terms and low correlation with global markets.
Foreign Investment in Chinese NCDs
Foreign investors, particularly from the US, are actively purchasing Chinese negotiable certificates of deposit. These short-term debt instruments offer a higher guaranteed return compared to US Treasuries. Cary Yeung from Pictet Asset Management noted, 'Global investors are trying to seek something that is very decorrelated. The price action is completely different to the rest of the world.'
China-US Trade War: Impact on Investments
The trade war between China and the US has impacted economic activities. There are signs of capital flow shifts towards China. In February 2024, foreign holdings in NCDs reached a record 1.14 trillion yuan. As the yuan loses appeal and trade uncertainties loom, these instruments provide a reliable refuge.
Stability of the Chinese Stock Market
The index of Chinese stocks in Hong Kong remained stable, closing the day up 0.6%. This year, Chinese stocks are outperforming their global counterparts. In 2025, the MSCI China Index rose by 20%, while the S&P 500 decreased by 4%.
Amid economic instability, Chinese debt instruments are increasingly attractive to foreign investors due to their high returns and low market correlation. This underscores China's continued significance in the global economy.
