Chinese banks lift bond holdings amidst weak credit demand

Total bond investments hit a 13.5% growth rate for 2021-2025.

Chinese banks have ramped up their bond investments, but volatility in interest rates pose downside risks.

Their total bond investments hit a four-year compound annual growth rate (CAGR) of 13.5% in 2021-2025, or $11.86t (RMB84.4t) as of August 2025. This represents 21.4% of total banking assets, according to UOB Kay Hian.

This suggests a structural shift towards investment-driven balance sheet expansion amidst subdued credit demand, said UOBKH analyst Kenny Lim Yong Hui in a 9 October 2025 report.

Changes in the total social financing (TSF) mix and a favourable bond market have prompted banks to increase bond allocations, he added.

“Importantly, banks remain the dominant buyers of government securities, holding around 69% of total outstanding bonds, reflecting the sector’s increasing role in supporting fiscal expansion,” Lim wrote.

China’s 10-year government bond yield has declined ‘sharply’ to 1.9% from 3.2% and 2.9% at end-2020 and end-2022, respectively.

(US$1 = RMB7.11; as of 13 October 2025, Morningstar from Google)