Warning: members of the public are being contacted by people claiming to work for AXA Investment Managers UK Limited.  Find out more information and what to do by clicking here.

Investment Institute
Macroeconomic Research

Entering the world's second largest bond market

  • 09 February 2021 (5 min read)


China’s bond market reached $17 trillion in Q3-2020, making it the world’s second largest market after the US. The low market cap to GDP ratio compared with other markets suggests still significant growth potential ahead

There are three markets for RMB bonds, along with an active offshore market for hard-currency credits. Rates and credit bonds are roughly of equal size, and predominantly owned by banks and mutual funds

Foreign holdings represent c3% of the market and have grown rapidly in recent years. Foreign buying has so far concentrated in government bonds, supported by China’s relatively high interest rate differential and index inclusion. Investment in onshore credit has progressed slowly due to more complex risk considerations 

China has recently been added to all major international bond indices, and global reserve managers have started to allocate to RMB bonds for diversification. These secular trends are still in their infancy and could develop rapidly as China further opens its markets and investor confidence in RMB assets grows  

RMB bonds have delivered solid performance relative to other markets. With onshore interest rates already back to pre-COVID levels and RMB on an appreciation path, China offers good returns prospects in a zero-rate environment. Our analysis shows that adding China to a global fixed income portfolio can visibly enhance its risk-return characteristics

China is home to the world’s largest green bond market, with 2019 issuance accounting for over 20% of the global supply. While there are still some discrepancies between local and international standards, a large swarth of the market is aligned with the global recognition of “green” and offers attractive risk-adjusted opportunities

Download the full deck
Download report (1.92 MB)


    This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

    Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

    All investment involves risk , including the loss of capital. The value of investments and the income from them can fluctuate and investors may not get back the amount originally invested.

    Risk Warning

    The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested.