Baku:China's position as a global creditor has become more pronounced, particularly through the framework of its money and capital markets. A key component of this includes the government bond market and the operations of Chinese commercial banks.
According to Thai News Agency, two significant types of yuan-denominated bonds are central to China's strategy Panda Bonds and Dim Sum Bonds. Panda Bonds are issued domestically in China by foreign entities, while Dim Sum Bonds are issued offshore. The issuance of Panda Bonds by foreign governments and financial institutions has seen a significant increase, doubling from the previous year.
The factors driving foreign entities to tap into China's bond market include low borrowing costs, abundant liquidity in China's banking sector, and the yuan's appreciation. The yield on Chinese government bonds is notably lower than those in the US and Japan, making China an attractive option for borrowing. Furthermore, China's banks are increasing cross-border lending due to excess liquidity, as domestic investment and consumption slow down.
The People's Bank of China holds substantial international reserves and is not deterred by the release of yuan abroad. This policy helps manage the yuan's appreciation, benefiting China's export sector. Additionally, China maintains a trade surplus, and the internationalization of the yuan, or "Yuanization," has facilitated the yuan's role as a reserve currency in many countries.
China's strategy and policy decisions are also shaped by experiences from past global financial crises. The country is focusing on developing financial mechanisms to support the global financial system, influenced by lessons from the 1997 Asian crisis and more recent economic challenges.
The Fifth Plenary Session of the 20th Central Committee of the Communist Party of China has been pivotal in setting the country's economic direction. President Xi Jinping's promotion of "New Quality Productive Forces" underscores the importance of technological innovation and institutional support. These efforts aim to integrate technological advances with real-world applications, incentivize research and development, and position the private sector as a key economic driver.
China's evolving policies emphasize upgrading existing industries with digital innovation and ensuring AI systems are safe, reliable, and controllable. The country is leveraging its financial system's liquidity to support startups and high-tech companies, demonstrating a comprehensive approach to strengthening its economic and financial influence globally.