Economics
China's Double Edged Sword: How to Lure Cash But Keep Control
- Rising foreign investment raises stakes for policy competence
- Shock to confidence could see overseas money flow back out
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China’s increasing success at luring global investors to its stock and bond markets may be laying the seeds of future volatility as its financial system becomes subject to overseas sentiment like never before.
The country’s years-long campaign to attract steady streams of foreign capital is now paying off, providing support for the yuan in the face of diminishing current-account surpluses. Foreign ownership of Chinese bonds has climbed to a record of more than $260 billion, while holdings of stocks stood at $172 billion in the most recent data.