According to a report by UOB Kay Hian, Chinese banks have significantly boosted their bond holdings amid weaker demand for traditional credit. As of August 2025, these investments stood at $11.86 trillion (), reflecting a compound annual growth rate (CAGR) of 13.5% between 2021 and 2025.
This trend shows a structural shift where banks are expanding their balance sheets through investments rather than lending, partly due to a favorable bond market and changes in the overall financial landscape (TSF mix). The banks’ involvement is crucial, as they are the primary purchasers of government securities, holding about 69% of the total outstanding bonds and supporting government spending.
Despite this strong growth, analyst Kenny Lim Yong Hui warns that volatility in interest rates poses a downside risk to this investment-heavy strategy. This concern is set against a backdrop of sharply declining government bond yields, with China’s 10-year yield dropping to just 1.9% from 3.2% at the end of 2020.
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