(Yicai Global) May 11 -- The US government is said to want to restructure the Federal Retirement Thrift Investment Board, which runs the retirement savings and investment plan for federal employees, raising concerns that this could cut US investment in Chinese assets and lead to capital outflows.

But research by Yicai Global shows that US pension plans, one of the world’s largest pension pools at around USD32.3 trillion, account for just a limited number of Chinese stocks and bonds and thus the risk of capital flight is not high.

Only a small amount of US pension funds is invested in Chinese bonds, between USD10 billion and USD12 billion, Zhang Meng, foreign exchange and macro strategy analyst at Standard Chartered, told Yicai Global. Most of this is in offshore bonds valued in US dollars and issued by Chinese firms.

The amount invested in the Chinese stock market, which has a total market capitalization of around USD13 trillion, climbed to USD161 billion in 2018 from USD53 billion 10 years ago, Zhang said.

Just four US pension funds are qualified to enter China’s USD14 trillion onshore bond market, according to official data. But other publicly offered funds and private institutional investors, including hedge funds, are constantly increasing their holdings of Chinese assets.

The Chinese market is an important source of revenue and even US funds need to earn as much of a return as possible, Richard Titherington, chief investment officer and head of emerging markets and Asia Pacific equities at JP Morgan Asset Management, previously told Yicai Global.

The New York-based fund manager has investments in over 750 Chinese companies, one third of which are listed on the mainland and the rest elsewhere.

Risk appetite among foreign investors bounced back last month. Trading by Hong Kong investors in mainland stocks via the Hong Kong Stock Connect saw CNY53.3 billion (USD7.5 billion) flow into China last month, a reversal of the CNY68 billion that flowed out in March. The China Central Depository and Clearing, responsible for Chinese government bonds, handled capital inflows of CNY43.3 billion in April.

The total value of on-shore Chinese assets held by overseas investors reached CNY6.4 trillion (USD902 billion) at the end of the first quarter. This included CNY1.9 trillion in stocks, CNY2.3 trillion in bonds, CNY900 billion in loans and CNY1.3 trillion in deposits.

Editors: Liao Shumin, Kim Taylor