Money has been flooding into China's bond markets over recent weeks. Photo: AFP

(ATF) – China’s domestic bond market has drawn huge foreign fund inflows, with yield differentials over other markets widening in a risk-averse environment, as the world’s second-largest economy becomes the first to recover from the deadly coronavirus pandemic.

These flows are expected to accelerate in the medium term as more international benchmarks include Chinese bonds in their indexes.

Bond Connect data shows March logged the highest monthly turnover of 478.2 billion yuan ($67.4bn), indicating stepped up activity. 

“The inflow data in the Bond Connect report shows two trends, there is gradual increase in foreign investors’ Chinese bond holdings, indicating steady foreign investors’ appetite for Chinese bonds,” said Jing Sima, China Investment Strategist at BCA Research.

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