Who’s buying China’s domestic bonds?

CHINA ADVISORY - Report 04 Mar 2019 by Andrew Collier

One large part of China’s growing credit stimulus has been the bond market. A significant portion of this increased investment has come from the private sector. But how much? And how stable and transparent is this source of funding?

We analyzed data on China’s bond market to understand the change between 2015 and 2018 in ownership of Chinese domestic bonds. Our conclusion is that, while banks have traditionally been the largest buyers of bonds, much of the growth has shifted toward investment funds. This exemplifies the gradual privatization of fiscal resources – in this case, of debt. This raises important questions about the sustainability of China’s stimulus.

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