SHANGHAI- Foreign investors raised their holdings of Chinese government bonds (CGBs) in November at the fastest pace in 10 months, official depository data showed on Thursday, supported by passive flows as a major index began including the instruments.

Total foreign holdings of CGBs stood at 2.39 trillion yuan ($376.58 billion) at the end of November, data from China Central Depository and Clearing Co showed on Thursday. That was a record high and up 3.8% from a month earlier - the quickest monthly percentage increase since January.

November marked the first full month of phased inclusion of CGBs in FTSE Russell's World Government Bond Index (WGBI). Inclusion is expected to eventually drive $130 billion of index-related foreign inflows into the bonds over a 36-month period. 

Offshore investors' holdings of quasi-sovereign bonds issued by China's policy banks, typically among the most liquid in China's interbank bond market but which are not included in WGBI, slipped 0.15% to 1.07 trillion yuan. It was the first such dip in holdings since April 2020.

While analysts say they expect passive flows to continue, investor sentiment has been hit in recent months by a debt and liquidity crisis rocking China's $5 trillion property sector that has raised concern about wider financial contagion.

But after touching record highs in early November, Chinese corporates' high-yield dollar bond spreads have narrowed as investors look to a managed debt restructuring of embattled developer China Evergrande Group.

Rating agency Fitch on Thursday declared Evergrande and smaller rival Kaisa Group 1638.HK in default after they missed bond payments this week. Kaisa has also begun work on an offshore debt restructuring. ($1 = 6.3466 Chinese yuan)

(Reporting by Andrew Galbraith; Editing by Kim Coghill) ((Andrew.Galbraith@tr.com; +86 21 2083 0079; Reuters Messaging: andrew.galbraith.thomsonreuters.com@reuters.net ; Twitter: https://twitter.com/apgalbraith))