A new sheriff in town?

Could China's 10-year bond become the new "risk-free" asset?

This chart below shows the spread between US 10-year Treasury yields and China's 10-year government bond.

For most of 2008-2021, China paid more than the US. Since 2022 it has flipped, and the gap is now roughly 3.5 percentage points in the US's disfavor.

Lower borrowing cost is the market's way of saying "we trust this issuer." So is Beijing now borrowing more cheaply than Washington because investors see less risk there?

The bull case:

🔸 Gold. China keeps adding to its reserves, anchoring the yuan to something no government can print.

🔸 Policy flexibility. No election cycle means Beijing can push through painful reforms (property, local government debt) that Western politicians can't sell to voters.

🔸 Fiscal trajectory. Debt and deficit concerns are weighing on Treasuries, while China's yields are anchored low.

The honest counterpoint: a low yield isn't the same as a risk-free asset. A true global safe haven needs deep liquidity, free convertibility, open capital markets, and an independent legal system. China is still working on all of these. Low yields can also reflect weak growth and deflation risk, not just trust.

But "risk-free" has always been a status earned over decades, not a label. The question isn't whether the CGB replaces Treasuries tomorrow, but whether we're watching the first crack in a monopoly we took for granted.

Would you hold Chinese government bonds as a reserve asset?

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