(Yicai Global) April 23 -- Overseas investors boosted their holdings of Chinese bonds in the first quarter by a net USD63.3 billion, or 11 percent over the previous quarter, against the backdrop of a strong rebound in the world’s second-largest economy.

Foreigners added USD3.3 billion last month, notching up some growth compared with March last year and in 2019, though less than the records set this January and February, according to data from the State Administration of Foreign Exchange.

China’s economy is doing well, providing fundamental support for foreign investors to raise their holdings of domestic bonds, SAFE spokeswoman Wang Chunying told reporters today. The lure of Chinese debt has also been driven by relatively high returns on assets in the country and the safe-haven attributes of yuan assets, she added.

Since China began in 2016 to accelerate the opening up of its debt market to foreigners, inflows have averaged double digits gains every year, but there is plenty of room for more, Wang said.

Foreigners held just 3 percent of Chinese bonds at the end of last year, compared with 28 percent for the United States, 14 percent for Japan, and 9 percent for Brazil, an emerging market economy.

Chinese debt will attract more foreign funds as the country further opens its capital market, Wang said.

The country’s foreign exchange reserves remained basically stable in the first quarter, Wang added. They shrank to USD3.17 trillion at the end of March, a decrease of USD46.5 billion from the end of last year, according to SAFE data.

During the period, the US dollar index rose 3.7 percent. Under the combined effect of exchange rate conversion and asset price changes, the book value of foreign exchange reserves declined slightly.

Editor: Tom Litting