Foreign investors buy Chinese bonds again after 13-month pause

Foreign Investors Return to Chinese Bonds After 13-Month Pause

Foreign investors purchased Chinese onshore yuan-denominated bonds in May for the first time since April 2025, ending a 13-month streak of net selling that had drained roughly $180 billion from the market, according to official data released on Monday.devdiscourse

A Turning Point for Chinese Fixed Income

Foreign institutions held 3.21 trillion yuan ($475 billion) in bonds traded on China’s interbank market as of the end of May, up from 3.12 trillion yuan a month earlier, according to figures from the People’s Bank of China’s Shanghai head office. The increase of approximately 90 billion yuan represents the first net purchase by overseas investors since April 2025.thestandard

The reversal comes after what Bloomberg reported in April was 11 consecutive months of net selling through March, the longest such stretch since the central bank began publishing regular data in April 2020. Over that period, foreign holdings in the interbank market had shrunk by about 28%, or roughly 1.25 trillion yuan.bloomberg

China’s Bond Market as a Haven

The return of foreign capital coincides with a period of turmoil in global bond markets. Benchmark yields have risen sharply in the United States, Britain, the euro zone, and Japan in response to the ongoing Iran conflict, according to Reuters. Chinese government bonds, by contrast, have offered low volatility and stable returns, with 10-year yields holding steady near 1.75%—roughly one percentage point below Japan’s.reuters

Analysts say the minimal correlation between Chinese bonds and Western fixed income markets has made them an attractive diversification tool for global portfolios seeking shelter from rising yields elsewhere.devdiscourse

Broader Context

The inflows also arrive against a backdrop of shifting capital flows between the world’s two largest economies. In February, Chinese regulators advised domestic financial institutions to limit their holdings of U.S. Treasuries, citing concentration risks and market volatility. That guidance underscored Beijing’s broader push to reduce exposure to dollar-denominated assets while promoting the internationalization of the yuan.bloomberg

Whether the May purchases mark the beginning of a sustained trend or a one-off adjustment remains to be seen. The 13-month outflow had coincided with geopolitical tensions and a widening yield gap that made U.S. and other developed-market bonds more attractive. The question now is whether China’s status as a relative haven in a volatile global bond market can hold.