Market Summary

Yield Movements

Between 15 June and 15 August, local currency government bond yields in the People’s Republic of China (PRC)  fell for all tenors. Bond yields fell the most for the 1-year through the 7-year tenors, declining an average of 20 basis points and for the 10-year tenor, which fell 16 basis points.   The PRC was the sole market in the region whose entire yield curve declined, driven by economic weakness in the domestic economy.

Size and Composition

The local currency bond market grew to a size of CNY123.1 trillion (USD18.4 trillion) at the end of June. Overall growth slightly rose to 3.5% quarter-on-quarter (q-o-q) in the second quarter of 2022 from 3.3% q-o-q in the first quarter (Q1) of 2022. Total government bonds outstanding reached CNY79.7 trillion, following an acceleration in growth to 4.3% q-o-q in the second quarter of 2022 from 2.7% q-o-q in Q1 2022 on increased local government bond issuance following the need to completely utilize the special bond quotas  Corporate bonds outstanding reached CNY43.3 trillion at the end of June, with growth slowing to 2.0% q-o-q from 4.2% q-o-q in Q1 2022.

Policy, Institutional and Regulatory Developments

In May, the Government of the PRC announced a package of 33 stimulus measures meant to shore up the domestic economy and provide support to companies in the wake of quarantine measures meant to contain the coronavirus disease (COVID-19). The measures include an expansion of companies covered by a value-added tax rebate, deferral on payments of social security premiums, an expansion of tax relief measures, a deferral of contributions to the housing provident fund, and boosted infrastructure spending, among others.