Steady Foreign Holdings in China's Bond Market, Sovereign Bonds Lead

Latest custody data from the People's Bank of China reveals a consistent presence of international investors in the country's interbank bond market. By the end of June 2026, the total face value of bonds held by offshore institutions stood at RMB 3.20 trillion. This figure represents approximately 1.8% of the total custodial volume in the interbank bond market, serving as a vital indicator of global capital's confidence in China's financial landscape.

Breakdown of Holdings: Sovereign Bonds Dominate

The distribution across bond types clearly outlines foreign investor preferences. Sovereign bonds are the undisputed favorite asset class.

  • Treasury Bonds: Holdings amounted to RMB 2.01 trillion, constituting a dominant 62.8% of the total offshore portfolio. This high share underscores that the core rationale for foreign investment remains confidence in China's sovereign credit and its long-term economic fundamentals.
  • Policy Financial Bonds: Holdings reached RMB 0.75 trillion, accounting for 23.4%. Issued by policy banks with quasi-sovereign credit status, these bonds are a popular choice for investors seeking yield alongside relative safety.
  • Negotiable Certificates of Deposit (NCDs): Holdings were RMB 0.28 trillion, making up 8.8%. These instruments, used for liquidity management, also attract a portion of offshore funds.
  • Other Bonds: Other varieties, including credit bonds, totaled RMB 0.16 trillion in holdings, representing 5.0% of the portfolio.

Market Implications and Forward Look

The sustained and optimized allocation of offshore funds to RMB bonds is a direct reflection of the deepening two-way opening of China's financial markets. The allocation of over 60% to treasury bonds provides foreign investors with a relatively secure asset while offering a stable source of international funding for China's fiscal needs. As China continues to refine its financial market infrastructure and advance the internationalization of the RMB, the interbank bond market is poised to attract an even more diverse range of long-term international participants.