(Yicai Global) Feb. 16 -- Foreign investment into China reached a historic high last month as the economy stabilized amid the country’s eased Covid-19 regulations.

Overseas investors bought a net USD27.7 billion of Chinese mainland shares in January, according to data released by the State Administration of Foreign Exchange yesterday. The trade surplus rose 9 percent from December to USD38.7 billion, also a record high, the SAFE data showed.

The net inflow of cross-border funds, including trade in goods and foreign direct investment, continued to play a vital role, said Wang Chunying, SAFE’s deputy director and spokesperson.

“As China optimized its pandemic containment measures, policies to balance growth have been gradually taking effect, and economic stabilization and recovery have been further consolidated, leading to foreign capital actively participating in the domestic stock market,” she added.

Foreign capital inflows have increased since the fourth quarter of last year. The net inflow of funds into the Shanghai and Shenzhen stock markets through the northbound routes rose by CNY57.4 billion (USD8.4 billion) to CNY37.8 billion in the quarter from the previous three months.

“That reflects the increased attractiveness of China's capital market to foreign investment,” said Wen Bin, chief economist at China Minsheng Bank.

In the longer run, China-US interest rate differentials are expected to narrow, and the capital market should maintain healthy development and further promote opening-up, Wen predicted. Low valuations and profit recovery are also expected to attract more overseas investors, he added.

The rebound in China's equity market has resonated with the Chinese yuan’s appreciation, according to Xie Yaxuan, chief macro analyst at China Merchants Securities. Meanwhile, the currencies of emerging economies were stable but weak, and the net capital outflow from emerging Asian economies showed that China's risky assets were particularly favored.

China's monetary policy will remain moderately loose in the process of urgent economic recovery, so it may be hard for foreign investors to increase their holdings of yuan-denominated bonds if the US Federal Reserve does not ease its policy, Xie noted.

Editor: Futura Costaglione