More than 130 billion yuan ($19.36 billion) flowed into the Chinese mainland's A-share market in January, far exceeding 90 billion yuan in the whole of 2022. Even during the Lunar New Year, when the mainland's capital market was closed, about $800 million of the $1.1 billion of daily net inflows into emerging markets still went to exchange traded funds linked to Chinese assets, according to the Institute of International Finance.
By increasing their holdings of renminbi-denominated assets, global investors are casting the best vote of confidence in China's economic growth. RMB assets can provide global investors with high-quality channels to gain continuous, stable, safe and long-term returns and share the dividends of China's economic growth. At the same time, the entry of more medium- and long-term funds, institutional investors and overseas investors into the Chinese market will help China further open to the outside world, steadily promote the internationalization of the RMB, enhance the efficiency of its resource allocation, and facilitate high-level circulation and high-quality development of science and technology, capital and industries.
RMB assets are being supported by various positive factors and expectations in earnings, valuation or exchange rate. The January purchasing managers' index also showed that the degree of China's overall economic prosperity picked up significantly. The improvement of China's economic fundamentals means its market has a long-term investment value.
Compared with the share of China's GDP in the world's total, the proportion of RMB assets in major global financial indexes is still low and the proportion of RMB assets in global investor portfolios is expected to increase, providing investors in the Chinese market more opportunities in value investment and quantitative investment. With the further simplification of the investment process for foreign investors to enter the Chinese market, China's financial market will realize comprehensive and high-level institutional opening-up, which will attract global investors to increase their holdings of RMB core assets.
China needs to steadily and actively promote the two-way and orderly opening-up of its financial market on the premise of ensuring safety and controllability. It should actively prevent and effectively deal with the transmission and impact of possible arbitrage, cross-border capital flow fluctuations and offshore market risks on the onshore market. It should continue to resolutely open financial services, and create a market environment conducive to fair competition and common development between domestic and foreign capitals.