China’s savings, offshore investment, in charts

A decade ago, Ben Bernanke - then Federal Reserve chairman - argued an excess supply of savings over investment globally was driving down long-term real interest rates. 

The source of the excess he said was primarily China. The country had a high savings rate and was spending those savings buying safe assets – notably US treasuries.

"Recent events have foreboded a slowdown in overseas investment sprees [by China].” - Raymond Yeung

Today, at the national level, China’s US treasury holdings remain high, equivalent to 29 per cent of the Fed’s balance sheet. Chinese households and corporates also favour safe assets but for them an alternative is offshore property - increasingly across emerging Asia. 

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Source: IMF, ANZ Research

That phenomenon is slowing: offshore, Chinese investors are facing increased hurdles to obtaining mortgages.

Meanwhile, Chinese authorities are also restricting some ‘irrational’ investments, including overseas properties. So would-be investors’ supply chains have run into speed bumps. 

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Source: Government websites, ANZ Research

Although we believe China will continue to raise its investments globally, recent events forebode a slowdown in overseas investment sprees, at least temporarily.

Outward direct investments in 2017 dropped substantially to $US120bn (minus 29.4 per cent).

Some Chinese conglomerates are beginning to dispose of their interests in offshore development projects and commercial real estates, according to news reports.

Domestically, the environment is not supportive of safer investments. Deleveraging is pushing down government bond prices. Local property markets have also tightened. Investors seem to have no choice other than to buy equities or wealth management products.


At the top of China’s policy agenda in 2018 is risk management. Despite an improved exchange rate outlook, the policy bias will still favour capital inflows.

Currently the only official channel to alleviate the pressure of China’s savings glut seems to be Hong Kong equities denominated in $HK.

But the market is virtually dominated by Chinese companies. It is not a meaningful way to resolve the global imbalances highlighted by Mr Bernanke.

Restrictions on foreign buyers are a reaction to the savings glut

China’s buying of foreign properties could be seen as circulating its accumulated trade surplus to the developed world.

The resulting price increases have prompted many governments to impose restrictions on foreign buying and carry out assessments of the impact on local construction and citizens’ affordability.

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Source: CEIC, Bloomberg, ANZ Research

Raymond Yeung is Chief Economist, Greater China & Kaushik Baidya is an economist at ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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