FINANCE

PBOC Concerned Bond Market Boom May Leave Smaller Banks Exposed

By Wang Shiyu, Xia Yining, Zhang Yuzhe and Denise Jia

Published: Jul. 15, 2025 5:46 a.m. GMT+8

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The People’s Bank of China

China’s bond market took off in the first half of 2025, turning bonds into hot commodities for institutional investors. But the rally also triggered concern from the central bank, which is now warning that smaller banks may be overexposed to interest rate and credit risks.

At a press conference on Monday, Cao Yuanyuan, the People’s Bank of China (PBOC)’s head of financial markets, reported that China issued 44.3 trillion yuan ($6.1 trillion) in bonds during the first half of 2025 — a 16% increase year-on-year. Net bond financing reached 8.8 trillion yuan, accounting for 38.6% of all new social financing, and played a critical role in supporting fiscal policy and corporate funding.

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China issued 44.3 trillion yuan ($6.1 trillion) in bonds in H1 2025, up 16% year-on-year, with net bond financing at 8.8 trillion yuan.
Small and medium-sized banks contributed over 80% of bond trading volume, making them more vulnerable to interest rate and credit risks.
The PBOC plans to enhance market surveillance and risk management amid concerns of overexposure among smaller banks.

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