On September 15, 2023, staff were counting RMB in the personal financial business service area of a bank in Hai’an City, Jiangsu Province.
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The Financial Times, backed by China’s central bank, reported on Saturday that financial institutions were essentially betting against the Chinese economy by snapping up Chinese government bonds, citing industry sources and experts.
The report is the latest warning to China’s bond market after the People’s Bank of China (PBOC) expressed concern and launched a plan to sell government bonds to cool bond gains.
The newspaper previously said late on Friday that the People’s Bank of China was determined to maintain a normal rise in the yield curve and correct bond market risks.
The People’s Bank of China said earlier this month it had hundreds of billions of yuan in bonds available to borrow and would sell them based on market conditions.
“Financial News” quoted unnamed experts as reporting that the move showed the central bank’s desire to stabilize the exchange rate and economic expectations.
The newspaper said: “Financial institutions’ frenzied purchase of government bonds is tantamount to the expectation that interest rates will get lower and lower in the future.”
“They are basically shorting the yuan and the Chinese economy, adding to the pressure of capital outflows.”
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