Despite its enormous size, China’s bond market, the world’s second-largest by scale, is facing numerous potential risks. By October 2025, its interbank bond market had attracted 1,180 overseas investors with holdings totaling 3.73 trillion yuan (US$530b). Among the holdings, nearly 95 percent were government and policy-based financial bonds. However, against constant global inflation, geopolitical uncertainties and liquidity agglomeration effects, the country should be vigilant to market fluctuations and possible financial sanctions imposed by other countries. Meanwhile, to gain pricing power in the bond market, China should narrow the costs between onshore and offshore debt financing. The country is advised to enhance the transparency of bond accounts, increase the influence of its treasury yield curve and develop an onshore-based offshore bond market in the Shanghai Free Trade Zone.
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