China: Cross-asset inflows and policy shifts – BNY

BNY’s Bob Savage highlights China as the only emerging market currently seeing net buying across equities, bonds and currency, even as domestic data remain mixed. He notes that fixed income inflows are supported by lower policy rates, while authorities tighten outbound investment rules and retain scope to allow the renminbi to appreciate in a controlled, export-sensitive manner.

Cross-asset inflows and tighter controls

"Meanwhile, there is one emerging market where all assets are now being net-bought: China."

"Given input price risks and a large legacy surplus, there is capacity and a solid policy rationale to let the renminbi appreciate despite domestic pressures."

"However, the pace will be controlled and subject to export/economic performance, and the cautious inflows also seem to reflect such a policy stance."

"China has announced new outbound investment regulations effective July 1 that significantly strengthen government oversight of overseas transactions involving Chinese investors, technology, data and national security."

"The regulations form part of a wider effort to strengthen export controls, protect strategic technologies, reinforce supply chain security and increase China’s ability to respond to Western sanctions and investment restrictions."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)