FINANCE

Overseas Investors Drawn to Stability of Chinese Bonds

Published: Aug. 18, 2025 8:11 p.m. GMT+8

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Foreign investors are stepping up purchases of onshore Chinese bonds, drawn by their relatively stable returns, an executive at UBS Group AG’s asset management arm said.

The trend emerged last year, and has grown prominent this year as U.S. tariff policy has cast a cloud over the economic growth prospects of the U.S. and the rest of the world, prompting many to consider non-U.S. dollar assets, said Raymond Gui, head of Asian fixed income at UBS Asset Management.

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Foreign investors are increasing purchases of onshore Chinese bonds, attracted by stable returns and diversification from U.S. dollar assets.
Foreign holdings of yuan-denominated bonds exceeded $600 billion, accounting for about 2% of such bonds in China; government bonds remain preferred, but allocations to corporate and NCDs have risen.
China’s bond market volatility is around 2%, significantly lower than U.S. and European bond markets, enhancing portfolio stability for global investors.

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Who’s Who

UBS Group AG: UBS Group AG's asset management arm sees increased foreign investment in onshore Chinese bonds. Raymond Gui, head of Asian fixed income at UBS Asset Management, notes this trend is driven by stable returns and a desire for non-U.S. dollar assets due to U.S. tariff policy. He highlights the potential for growth in foreign holdings and the increasing allocation to corporate bonds.

UBS Asset Management: UBS Asset Management's head of Asian fixed income, Raymond Gui, notes that foreign investors are increasingly purchasing onshore Chinese bonds due to stable returns and a desire for non-U.S. dollar assets. While government and policy bank bonds are preferred, allocation to corporate and non-sovereign bonds, particularly bank-issued negotiable certificates of deposit, is rising.

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What Happened When

April (year not specified)：: U.S. President Donald Trump announced 'reciprocal tariffs,' after which the yields of China’s central government bonds have remained in a very narrow range.

2023：: Foreign investors began significantly increasing their allocation to corporate and other non-sovereign Chinese bonds, including bank-issued negotiable certificates of deposit (NCD).

2024：: The trend of foreign investors stepping up purchases of onshore Chinese bonds emerged.

2025：: The trend of increased foreign purchases of onshore Chinese bonds became more prominent.

July 2025：: The State Administration of Foreign Exchange published figures showing outstanding onshore yuan-denominated bonds held by foreign investors surpassed $600 billion.

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