Bloomberg News:

Many small and medium-sized banks are still investing in bonds aggressively. How does the central bank view their investment risks?

Zou Lan:

I'd like to invite Ms. Cao to answer the question.

Cao Yuanyuan:

First, thank you for your concern about China's bond market. In the first half of this year, China's bond market operated smoothly, with generally stable expectations and steady market growth, effectively supporting financing for the real economy. In the first half of 2025, 44.3 trillion yuan worth of bonds were issued in China's bond market, up 16% year on year. Net bond financing reached 8.8 trillion yuan, accounting for 38.6% of total social financing growth. This provided strong support for the implementation of proactive fiscal policies and financing for brick-and-mortar businesses. In the first half of the year, 13.3 trillion yuan in government bonds, 7.3 trillion yuan in corporate credit bonds and 6 trillion yuan in financial bonds were issued. Bond financing continued flowing toward key areas: more than 350 billion yuan in private enterprise bonds and more than 1 trillion yuan in green and technology-related bonds were issued in the year's first half. In June 2025, the average issuance rate of corporate credit bonds was 2.08%, down 32 basis points from the same period last year, further reducing financing costs for the real economy.

Regarding your concern about small and medium-sized banks' bond investments, bond investment is an essential component of bank assets. In recent years, loans and bonds have accounted for 60% and 25% of total bank assets, respectively, maintaining relative stability. Banks hold 70% of all government bonds and about 20% of all corporate credit bonds, providing strong support for the implementation of fiscal policies and the development of real economy. For small and medium-sized banks, it is reasonable — within regulatory limits — for them to appropriately increase bond holdings and allocate more safe-haven assets based on their own asset allocation strategies, as this helps smooth fluctuations in operating profits. Meanwhile, banks' spontaneous buying and selling of bonds serve as a market stabilizer. When bond rates are relatively high compared to loan rates and bond prices are relatively low, banks will buy bonds, helping to stabilize the market. Conversely, when bond rates are low and bond prices are high, banks selling some bonds can realize profits while maintaining their own sustainability in supporting the real economy.

Of course, we believe that small and medium-sized banks also need to maintain their bond investments at a reasonable level, striking a balance between investment returns and exposure to risk. For financial institutions that take a relatively aggressive approach to individual bond investments, attention should be paid to the interest rate and credit risks faced by the bonds. The PBC will continue to strengthen market monitoring, sharing information on high-risk institutions identified through monitoring with institutional regulatory authorities in a timely manner. We will pay attention to the capital adequacy ratio (CAR) and market risks. At the same time, the PBC will continue to enhance market development by continuously enriching interest rate and credit risk management tools and leveraging market mechanisms to effectively prevent financial market risks. 

That is all from me. Thank you for your question.