EconPapers    
Economics at your fingertips  
 

The Determinants of China’s International Portfolio Equity Allocations

Isha Agarwal (), Grace Weishi Gu () and Eswar Prasad ()
Additional contact information
Isha Agarwal: University of British Columbia
Grace Weishi Gu: University of California, Santa Cruz

IMF Economic Review, 2020, vol. 68, issue 3, No 6, 643-692

Abstract: Abstract We analyze shifts in the structure of China’s capital outflows over the past decade. The composition of gross outflows has shifted from accumulation of foreign exchange reserves by the central bank to non-official outflows. Unlocking the enormous pool of domestic savings could have a significant impact on global financial markets as China continues to open up its capital account and as domestic investors look abroad for returns and diversification. We analyze in detail the allocation patterns of Chinese institutional investors (IIs), which constitute the main channel for foreign portfolio investment outflows. We find that, relative to benchmarks based on market capitalization, Chinese IIs underweight developed countries and high-tech sectors, respectively, in their international portfolio allocations but overinvest in high-tech stocks in developed countries. To further examine Chinese IIs’ joint decisions on destination country–sector pairs, we construct continuous measures of revealed comparative advantage and disadvantage in a sector for a country based on trade patterns. We find that, in their foreign portfolio allocations, Chinese IIs overweight sectors in which China has a comparative disadvantage. Moreover, Chinese IIs concentrate such investments in countries that have higher comparative advantage in those sectors. Diversification and information advantages related to foreign imports to China seem to influence patterns of foreign portfolio allocations, while yield-seeking and learning motives do not.

JEL-codes: F2 F3 F4 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1057/s41308-020-00113-5 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: The Determinants of China's International Portfolio Equity Allocations (2020) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:imfecr:v:68:y:2020:i:3:d:10.1057_s41308-020-00113-5

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/41308/PS2

DOI: 10.1057/s41308-020-00113-5

Access Statistics for this article

More articles in IMF Economic Review from Palgrave Macmillan, International Monetary Fund
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2021-06-19
Handle: RePEc:pal:imfecr:v:68:y:2020:i:3:d:10.1057_s41308-020-00113-5