A quick guide to China’s interbank bond market

China's domestic bond market has become the world's third-largest, after the US and Japan. By end-2014, the outstanding domestic bond market was at CNY 35tn (c.USD 5.6tn), including CNY 32.8tn (94%) in the interbank market and CNY 2.3tn (6%) in the exchange market. These markets are much larger than the offshore Renminbi bond market, which was at CNY 758bn as of end 2014.

Key types of onshore instruments include China government bonds (CGBs, CNY 9.6tn, 27% of the total), policy bank bonds (PFBs, CNY 9.7tn, 27%), local government bonds (LGBs, CNY 1.2tn, 3%), PBoC bills (CNY 422mn, 1%), and credit (CNY 15tn, 42%). Key investor types include commercial banks, insurance companies, funds, securities and special settlement entities (PBoC, Ministry of Finance and policy banks). For CGBs, commercial banks held 70% of outstanding bonds as of end-2014, followed by special settlement entities (18%), and insurance (4%). For PFBs, commercial banks held 80% as of end-2014, followed by funds (10%), and insurance (6%).

Foreign ownership has increased dramatically in recent years - Standard Chartered estimates that over 60 central banks have invested in Renminbi-denominated assets. 

According to the PBoC, foreigners owned a total of CNY 4.5tn of onshore assets as of end-2014, including CNY 672bn of bonds (increasing by CNY 273bn in 2014), CNY 556bn of equities (+CNY 211bn), CNY 819bn of loans (+CNY 288bn), and CNY 2.4tn of deposits (+CNY 836bn). By type, foreigners owned CNY 221bn of CGBs, CNY 239bn of PFBs, CNY 212bn of credit and exchange-trade bonds as of end-2014, notes Standard Chartered.