Money & Finance › Markets of the world › World bond markets: about $160 trillion of debt (2025)
China's bond market, the world's second largest
Bond Connect since 2017· Asset or instrument
Fact, law or dataA rule, statute, definition or measured number.
China's onshore bond market, about 175–197 trillion yuan ($25–28 trillion) at end-2025 depending on the count, second only to the US.
See it on the Money & Finance map →How it works
Most bonds trade in the interbank market, and banks hold the bulk. The main issuers are the central government, provinces and cities (about 50 trillion yuan of local bonds), state policy banks and companies. Foreign investors have bought through Hong Kong's Bond Connect since July 2017, and Chinese bonds joined the big global indexes in 2019–21, yet foreigners hold only about 2%. As growth slowed and prices fell, the 10-year government yield dropped below 2% in late 2024.
Why it matters
Yields under 2%, often compared to Japan's 1990s, signal deflation fears; the market mainly funds governments and state firms, so it channels Beijing's priorities.
Facts, rules and data
People's Bank of China custody figures, Asian Development Bank AsianBondsOnline data, Ministry of Finance local-debt reports, and index decisions by Bloomberg, JPMorgan and FTSE Russell.
Debates and risks
How much hidden local debt remains (officials said it fell to about 6.5 trillion yuan by end-2025) and whether state ownership masks real credit risk.
Connections (2)
▸China's bond market, the world's second largest absorbed developer defaults during China's property crisis and Evergrande's collapse (2021–)Fact, law or data
The connection
Developers sold bonds onshore in yuan and offshore in dollars. Most defaults hit the offshore dollar bonds held by global investors; onshore, many developers won payment extensions. Meanwhile, investors fled to safe government bonds, pushing yields to record lows, so the wider market absorbed the shock.
When and why
Hong Kong and mainland China, 2021–25; Evergrande, Country Garden, Sunac and dozens of smaller developers.
How we know
Rating-agency default data, company announcements and ChinaBond yield records.
Debates and risks
How much developer debt remains hidden in trusts, wealth products or local-government vehicles.
▸China's bond market, the world's second largest includes huge local-government debt, akin to Municipal bonds and tax-free interestMainstream view
The connection
Since a 2015 budget-law change, Chinese provinces sell 'general' bonds backed by taxes, like US general-obligation munis, and 'special' bonds repaid from project revenue, like revenue bonds; their interest is also income-tax free. Before that, local governments borrowed through financing vehicles (LGFVs), whose debt is now being swapped into official bonds.
When and why
China's provinces and big cities since 2015; a roughly 10 trillion yuan debt-swap program was announced in November 2024.
How solid is the link?
Ministry of Finance data, the amended Budget Law and State Council announcements.
Debates and risks
Whether LGFV debt is truly backed by Beijing, and how much hidden debt remains outside the official figures.