China has made a move

China has made an important move. It has taken a significant step to further open its local bond market to international investors, specifically by allowing qualified foreign investors to trade government bond futures starting April 25, 2026. It is no surprise that this move happens when gulf countries (and others) need liquidity lines in case the IranIan conflict continues. China is opening its massive bond market a little bit more with futures offering, still with Chinese characteristics: (1) only for registered and qualified investors and (2) only for hedging purposes. But it’s the timing and the direction that matters. China is taking this opportunity to attract investors to finance its deficit. Right now foreign investment in Chinese bonds is a less than 5% of the total debt. What are they missing to be a magnet for flows? The abolishment of capital controls. And that will take time, but the message to the world is clear: we are an alternative to the U.S. Treasury market. This move is part of the dual circulation strategy (see chart below) where it prioritizes domestic (internal) circulation as the main driver of growth, while using international (external) circulation to support and reinforce it. The goal is to build a more resilient, self-reliant economy that is less vulnerable to external shocks (such as trade wars, technology restrictions, or global disruptions), while still benefiting from global markets and remaining open to high-quality foreign participation. A $14Tn bond market has opened up a bit more for investors.

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