(Illustration: Xia Qing/GT)
Foreign institutional investors increased their holdings of Chinese government bonds by 49.29 billion yuan ($6.83 billion) in April, marking a third consecutive month of net inflows and the longest such trajectory since late 2023, according to data from China Central Depository & Clearing Co, as reported by Yicai Global on Tuesday. The steady rise in foreign holdings of Chinese government bonds signals growing confidence among global investors in the stability and long-term resilience of China’s economy. At a time when international markets are grappling with volatility and uncertainty, the relative appeal of yuan-denominated assets is on the rise.
Driven by the global search for diversification and safe-haven yields, Chinese bonds are increasingly seen as a compelling low-volatility alternative. With stable returns and opening-up policy measures, China’s bond market is becoming an integral component of institutional investment strategies worldwide.
First, amid global economic uncertainty, the solid fundamentals and resilient performance of China’s economy are leading Chinese government bonds to be increasingly regarded as safe-haven assets that offer stable and reliable returns.
While many international markets continue to experience volatility, China’s bond market has demonstrated price stability. Coupled with relatively stable yields, these characteristics make Chinese government bonds particularly attractive to institutional investors seeking security and predictability during turbulent times. Recent macroeconomic indicators - such as better-than-expected GDP growth in the first quarter and solid April data - further reinforce the perception of China as being on a resilient recovery path. These fundamentals bolster investors’ confidence in both the yuan and China’s domestic debt market.
Second, the rise in foreign participation is a direct result of China’s continued efforts to deepen high-level financial market opening-up. In recent years, the People’s Bank of China (PBC), the central bank, in coordination with other regulatory bodies, has implemented initiatives to enhance cross-border investment access and efficiency.
For example, the continuous improvement of mechanisms such as Bond Connect has made the channels for foreign capital to enter China’s bond market smoother. These measures have significantly improved market accessibility and efficiency, making Chinese government bonds a more viable and attractive asset class for global investors.
Third, the continuous increase in holdings of Chinese government bonds by foreign institutions reflects the rising status of the yuan. The proportion of yuan assets in global investment portfolios is steadily increasing, further promoting the internationalization of the yuan.
The yuan is gaining traction as an international currency, used not just for trade but also for investment and reserves. As of the end of 2024, the yuan ranked as the fourth-largest payment currency and the third-largest trade financing currency globally, with a steady increase in its level of internationalization. More than 80 overseas central banks and monetary authorities have included the yuan in their foreign exchange reserves, according to a report by the Economic Daily in February.
Moreover, China’s bond market is well-positioned for continued expansion and deeper integration into the global financial system. Foreign institutions hold about 2 trillion yuan in Chinese government bonds, accounting for 5.9 percent of total government bond custody, the Xinhua News Agency reported in April. The figures indicate considerable room for growth.
As institutional investors look to diversify beyond traditional Western markets amid global economic uncertainty, yuan-denominated bonds have provided compelling benefits - competitive yields, a stable currency environment and a low correlation with global market trends.
The PBC has reiterated its commitment to high-level opening-up, pledging to expand cross-border market connectivity, improve the policy framework and enhance the ease of access for global investors. The PBC released the first-quarter 2025 monetary policy report on May 9, pointing out the need to strengthen the construction of the bond market. Such efforts are expected to attract more long-term international capital into China’s bond market.
More broadly, the resilience of China’s economy, evidenced by stable growth despite external pressures, combined with the accelerated internationalization of the yuan and ongoing financial reforms, will likely continue to bolster investors’ confidence. Over the long term, these structural strengths are expected to elevate the status of Chinese assets within global portfolios and solidify China’s bond market as a core destination for international capital allocation.
The author is a reporter with the Global Times.
原文地址：http://en.people.cn/n3/2025/0521/c90000-20317742.html