Jing Jianguo: 4-Year Return of 14.6%, Chinese Government Bonds Gradually Becoming a New Choice for Global Reserve Assets

Ask AI · What key supporting factors lie behind the steady performance of China’s government bonds?

** 21st Century Business Herald reporter Tang Jing**

Gold is trading sideways, U.S. Treasuries face pressure, and global capital is looking for the next “safe haven.” Recently, a report released by Gavekal, a financial research institution headquartered in Hong Kong, said that China’s government bonds have performed steadily in recent years. They are gradually becoming a viable alternative reserve asset, which could weaken the positions of gold and U.S. Treasuries.

The report challenges a core assumption in global reserve management—that U.S. Treasuries and the U.S. dollar are the only “safe havens.” The report argues that China’s industrial strength, along with large-scale, low-cost power generation capacity, jointly underpin the safe-haven attributes of China’s government bonds.

Regarding the potential and outlook for China’s government bonds as reserve assets, the reporter from 21st Century Business Herald recently conducted an exclusive interview with Jing Jianguo, Chief Economist of Shanghai and Director of the Offshore Finance Research Institute of the Financial Development Center.Jing Jianguo believes that, over the past four years, China’s bonds denominated in U.S. dollars have delivered a positive return of 14.6%, far outperforming bonds from the U.S., Europe, and Japan. China’s government bonds’ international appeal has already earned them a place among reserve assets; however, to move from “a feasible option” to “a mainstream choice,” continued efforts are still required in areas such as market liquidity and institutional-level openness.

_《21st Century》: When we talk about “alternative reserve assets,” what exactly are we referring to? Do we want them to have the liquidity, depth, and safety of U.S. Treasuries, or is it only intended as an additional supplement for risk diversification? To what extent do China’s government bonds currently meet the core criteria of reserve assets? _

**Jing Jianguo: **The global asset allocation landscape is undergoing a major shift: China’s government bonds are evolving from traditional emerging-market assets into “alternative reserve assets” in the eyes of global investors that combine safety, liquidity, and yield. The formation of this trend is in no way accidental. It is both the inevitable outcome of China’s long-term commitment to high-level opening up, the natural accumulation of years of deep cultivation in the bond market, and a direct reflection of the sustained increase in international appeal of renminbi-denominated assets.

To understand the potential of China’s government bonds as reserve assets, the first step is to clarify the core standards of reserve assets—safety, liquidity, and stable return. “Alternative” does not mean fully replicating the depth and scale of U.S. Treasuries; rather, it means playing a credible role among global reserve assets, providing central banks and sovereign wealth funds with “another option.”

In terms of safety, China has long maintained a sound fiscal position. By the end of 2025, the government debt-to-GDP ratio was far below the internationally recognized 60% warning line, and the scale of foreign exchange reserves was stable at more than $3.2 trillion. In 2025, China’s GDP exceeded 135 trillion yuan, and the economy continued to rebound, providing fundamental support for sovereign bond credit. Of particular note is that, in 2025, the Ministry of Finance’s $4 billion sovereign bond issued overseas received nearly 30 times oversubscription. The subscription orders totaled as much as $118.1 billion, and the final pricing was almost identical to that of U.S. Treasuries with the same maturity. After issuance, secondary-market yields quickly narrowed by about 40 basis points. This was the first time the interest rate on China’s government bonds denominated in U.S. dollars fell below that of U.S. Treasuries, meaning that China’s sovereign credit received unprecedented recognition in the global market.

In terms of liquidity, as of the end of February 2026, the total amount of bond custody in China’s bond market exceeded 18 quadrillion yuan. Of this, the amount of China government bond custody exceeded 3 trillion yuan, making it the world’s second-largest government bond market. In 2025, the total value of government bond issuance reached 16.01 trillion yuan, a historical high and up 28.37% year-on-year. Trading activity in the secondary market remained robust. In 2025, the 10-year government bond yield operated within a range of about 1.6% to 1.9%. Derivative tools such as government bond futures and pre-issuance of government bonds were continuously improved. In addition, in October 2025, the People’s Bank of China announced the resumption of open market government bond buy-and-sell operations, which played the role of a “benchmark” in stabilizing long-term expectations.

In terms of return stability, in October 2025, the 10-year government bond yield stabilized in the 1.6%–1.9% range, with volatility far lower than that of bonds from major global economies. In the Bloomberg Global Aggregate Index, China’s bond weight had reached 9.7%, surpassing the yen to become the third-largest currency-denominated bond holding after only the U.S. dollar and the euro. Over the past four years, China’s U.S.-dollar-denominated bonds achieved a positive return of 14.6%, starkly contrasting with the negative returns of dollar-denominated (-6.9%), euro-denominated (-17.9%), and yen-denominated (-36.3%) bonds over the same period. This benefits from China’s independent monetary policy cycle, and it also reflects international investors’ expectations that China’s economy will remain favorable in the long run.

《21st Century》: From a macro perspective, what factors mainly drive the “steady performance” of China’s government bonds? How sustainable are these factors?

**Jing Jianguo: **The steady performance of China’s government bonds is not supported by a single factor, but rather is the result of multiple advantages stacking up. It can be analyzed from several dimensions, including credit endorsement, monetary policy, and global demand.

An independent monetary policy cycle keeps it insulated from global inflation shocks. Faced with the pressure of persistent rate hikes by major global economies, China’s monetary policy adheres to the principle of “putting China first.” In 2025, China’s CPI rose by about 0.8% year-on-year, far below the level of major global economies. Moreover, China’s long-term favorable economic fundamentals have not changed, which is the fundamental guarantee for government bond credit.

Against the backdrop of geopolitical patterns accelerating their evolution, many countries have a real need to diversify reserve assets. This demand is both cyclical, structural, and institutional.

In terms of the cycle, in recent years, geopolitical conflicts have intensified and global inflation has repeatedly surged, leading international investors to worry about reliance on a single currency reserve asset. Since the COVID-19 pandemic, the Group of Seven has rolled out large-scale stimulus policies in response to economic shocks, causing government debt to surge. All three major international credit rating agencies have downgraded the U.S. sovereign credit rating. The IMF shows that as of the end of the second quarter of 2025, the U.S. dollar’s share in global foreign exchange reserves had fallen to 56.32%, the lowest level in 30 years. But cyclical demand is changeable: once geopolitical tensions ease, this demand may decline.

In terms of structure, China’s sustained development and the deepening of renminbi internationalization provide long-term support for renminbi-denominated assets. In 2025, the renminbi accounted for about 3.1% of global payments and about 2.8% of global reserves, both showing clear increases compared with the end of the 13th Five-Year Plan. This kind of structural demand is more durable because its foundation lies in the strengthening of economic strength and the accumulation of currency credit.

From an institutional standpoint, China’s institutional-level opening of the bond market provides convenience to offshore investors through investment channels. In 2025, the issuance volume of “panda bonds” reached 183.6 billion yuan. Among them, pure foreign-invested issuance entities accounted for 22.58%, up 5.15 percentage points from 2024. Morgan Stanley became the first U.S. financial institution to issue panda bonds, and the African Export-Import Bank became the first African multilateral financial institution to issue panda bonds. These changes fully demonstrate that international acceptance of China’s government bonds is increasing.

《21st Century》: From “feasible options” in global reserve management to “mainstream choices,” how many hurdles does China’s government bond still need to overcome? In what areas do we still need to “catch up”?

**Jing Jianguo: **China’s government bonds becoming one of the mainstream reserve assets in the world is a historical inevitability, but it still requires concerted efforts on multiple fronts. To achieve “hard steel must be produced with one’s own strength,” the key lies in the following five areas:

First, continuously improve market depth and liquidity. In 2025, the issuance volume of government bonds exceeded 16 trillion yuan, and market supply capacity is strong. However, there is still room to improve turnover rates in the secondary market. In the future, it is necessary to further optimize the market-maker system, enrich derivative product tools, and enhance market depth.

Second, steadily advance institutional-level opening up. At present, the share of domestic bonds held by overseas institutions is less than 2%, which does not match China’s position as the world’s second-largest bond market. In the future, it will be necessary to further optimize the “Bond Connect” and “Swap Connect” mechanisms, promote the inclusion of China’s government bonds in global mainstream bond indices, and increase their weights.

Third, improve the mechanism for renminbi exchange rate formation. The selection of reserve assets depends not only on the safety of the bonds themselves, but also on the stability of the currency. In the future, it is necessary to further enhance exchange-rate flexibility and maintain the basic stability of the renminbi exchange rate at a level consistent with reasonable equilibrium.

Fourth, expand the international application scenarios for renminbi bonds. Currently, renminbi bonds exist mainly as investment instruments, and their application scenarios in cross-border payments and international trade settlement still need to be expanded. In the future, it will be necessary to promote renminbi bonds to become globally eligible collateral and broaden their use in cross-border financing.

Fifth, optimize a rule-of-law-based business environment. When choosing reserve assets, it often becomes necessary to consider the stability and predictability of the legal environment. In the future, it will be necessary to further improve the legal and regulatory framework for the bond market and strengthen investor protection. For example, further improve mechanisms for handling bond defaults, enhance judicial efficiency, and provide overseas investors with a stable and predictable legal environment.

Looking ahead, China still needs to adhere to reform and opening up and develop the bond market on the basis of market-based principles. From the dual accumulation of issuance volume and custody volume to the continuous optimization of investor structure; from strengthening and deepening the interbank market to expanding and strengthening the exchange market; from steady development of the domestic market to ever-increasing international recognition—China’s government bonds are moving step by step toward the center stage of global reserve assets.

《21st Century》: You just mentioned developing the bond market based on market-oriented principles. In your view, what are the core challenges facing high-quality development of China’s bond market today? And how should we choose the reform path?

**Jing Jianguo: **This is a very critical question. The rise of China’s government bonds cannot happen without the strengthening of the entire bond market ecosystem. We have the world’s second-largest bond market. As of the end of February 2026, the total custody volume has already exceeded 18 quadrillion yuan. In 2025, the total issuance value reached 61.9 trillion yuan, and supply capacity is strong. But objectively speaking, the market’s “big but not strong” characteristic remains prominent, which is precisely where the focus of the next round of reforms should be.

At present, the most core challenges are reflected in three structural contradictions:

First, the “two separate skins” phenomenon caused by market segmentation. The share of custody volume in the interbank market exceeds 90%, while the exchange market is less than 10%. The two are not compatible with each other in terms of trading rules, settlement systems, and custody arrangements, which leads to inefficient cross-market transfer of custody. This segmentation not only affects pricing efficiency, but also limits further improvement in government bond liquidity. The key going forward is to make the interbank market stronger—consolidating its status as both the pricing center and liquidity center; and at the same time to strengthen the exchange market—simplifying issuance review and supporting financing for private companies and companies in science and technology innovation. The ultimate goal is to promote interconnectedness and interoperability across markets, unify information disclosure and rating standards, enable seamless cross-market custody transfer, and build a nationwide unified major market.

Second, the highly homogeneous investor structure. Risk-averse institutions such as commercial banks and insurers dominate, leading to similar risk preferences and creating a liquidity segmentation of “government bonds are hot, credit bonds are cold.” This requires vigorously cultivating a diversified investor structure and encouraging more funds, securities firms, wealth management products, and overseas institutions to participate. Encouragingly, in July 2025, four categories of non-bank financial institutions were included in the scope of “Southbound Bond Connect,” which is an important step toward optimizing the structure.

Finally, the degree of internationalization does not match the market’s scale. As of the end of 2025, overseas institutions held approximately 4 trillion yuan worth of bonds in China, accounting for less than 3% of the custody total, which is highly inconsistent with China’s position as the world’s second-largest bond market. From the issuance side, although the annual issuance scale of panda bonds has already exceeded 180 billion yuan, there is still significant room for the share of pure foreign-invested issuers to increase. Going forward, it will be necessary to further promote the broad international use of renminbi bonds, bring in international rules and international investors, and thereby put pressure on domestic market regulatory standards and settlement rules to converge with international practices, enhancing the global influence of renminbi-denominated assets.

To address the above challenges, we must adhere to market-based principles. For example, continuing to use the long-standing issuance cap of “cumulative bond balance not exceeding 40% of net assets,” which has severely lagged behind the financing needs of enterprises, we should introduce a quota approval mechanism based on dynamic indicators such as cash flows and debt service coverage ratios. At the same time, we need to accelerate and address the gaps in derivatives and expand products such as government bond futures, interest rate swaps, and credit default swaps (CDS), providing investors with effective risk-hedging tools.

Only by building a compliant, transparent, open, and vibrant bond market system can the foundation of China’s government bonds as global reserve assets be sufficiently solid. We have reason to believe that, as high-quality development of the bond market and high-level financial opening up continue to advance, China’s government bonds will inevitably become an indispensable and important member of global reserve assets, contributing China’s strength to the diversification of the international monetary system.