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Chinese bonds expand Japan's financial resources

By Zhang Jifeng: 0 Comment(s)Print E-mail China.org.cn, January 3, 2012

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[Photo/weibo.com/finance]

Japan's Prime Minister Yoshihiko Noda visited China with a "great gift" – his country's purchase of US$10 billion Chinese government bonds. As the first G7 country who owns Chinese bonds, Japan's action is undoubtedly spurting the internationalization process of the yuan.

At the same time, People's Bank of China also issued a document providing advices and guidance to strengthen cooperation between China's and Japan's financial markets and encourage the two countries to expand financial transactions.

Financial cooperation is a trend

The financial relationship of China and Japan continues its stable development. China's opening-up policies brought it direct investments from Japanese companies with the Official Development Assistance (ODA). Chinese enterprises then started to invest in Japan and bought Japan's national bonds before the recent reciprocal actions from the Japanese government.

These strengthening financial ties are an inevitable product of the healthily progressing financial cooperation between Japan and China, who made the mutually beneficial relationship one of the most important items on its agenda.

As any economic activity is inseparable from the support of capitals and financial services, the guidance document from China's central bank became the natural result after the two countries' many negotiations.

The financial cooperation between the two countries also stabilizes their positions as the world's second and third largest economies, which are of great influences to the region and the world at large.

Buying China's national debt could enlarge Japan's financial resources

There are mixed opinions in China about Japan buying Chinese bonds. Some think that this is a new opportunity of the yuan's internationalization. Others think that this will increase the already rising pressure on the Chinese currency, which could lead to further rise of its foreign exchange reserves and increase China's pressure on inflation and other financial tensions.

Both concerns in fact make sense, because every financial event has two sides. But this event's advantage is bigger than its disadvantage to China and Japan.

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