China’s public debt has withstood the recent global market sell-off triggered by the war in Iran, standing out as a safe haven for investors amid rising global inflation, according to an analysis by the Financial Times.
Yields on China’s 10-year government bonds edged down slightly to 1.81% since the end of February, in contrast to trends in major Western economies. In the United States, 10-year U.S. Treasury bonds rose by 0.38 percentage points to 4.34%, while in the United Kingdom yields surged by 0.7 percentage points.
Investors believe that, unlike the U.S. and Europe—where central banks are expected to keep interest rates high to contain energy-driven inflation—China is relatively insulated.
“China is less affected by rising energy costs and its economic starting point is quite different,” said Mitul Kotecha of Barclays, quoted by the newspaper.
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Chinese inflation remains subdued, reaching 1.3% in February, still below the official target of around 2%, giving room for more flexible monetary policy.
“The Chinese central bank is in a different position,” Kotecha added, noting that markets even anticipate potential rate cuts.
Another key factor is strong domestic demand. Due to capital controls, Chinese investors have limited options abroad, which supports demand for government debt.
“The market has been able to absorb the impact better because the demand base is ‘trapped’ capital,” explained Vincent Chung of T Rowe Price, as cited by the FT.
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China’s energy structure also contributes to this resilience. With a diversified mix—including coal, renewable energy, strategic reserves, and access to discounted Russian oil and gas—the country is more shielded from energy shocks than economies such as Japan or South Korea.
For international investors, Chinese debt also offers diversification. “It provides a very uncorrelated investment option for investors like us,” said Jason Pang of JPMorgan Asset Management.
Analysts highlighted that China’s bond market is relatively insulated. “Most investors are domestic. It is very different from the U.S. market,” said Wei Li of BNP Paribas.
Still, foreign interest has been growing. According to consultancy Gavekal Research, investing in Chinese bonds since 2012 has been one of the few ways to outperform U.S. inflation, unlike other markets that have posted significant real losses.
The predictability of China’s monetary policy is also seen as an advantage. “When the central government wants the central bank to cut rates, they cut them,” Wei Li added.
