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Against the backdrop of the accelerated restructuring of the global economic and financial landscape, Chinese assets are being repriced.
Recently, at the &#34;Global Financial Institutions Entering the Chinese Financial Market&#34; interbank market special event held in Shanghai, several chief economists from foreign institutions pointed out in a roundtable discussion that with the rise of geopolitical uncertainties and increased volatility of traditional core assets, Chinese assets are shifting from being a &#34;marginal allocation&#34; to a &#34;core option,&#34; becoming an important part of the global investors' asset allocation system.
Participants generally believe that this shift is driven both by endogenous changes in China's economic structure and industrial capabilities, as well as by a rebalancing of global capital's demand for safety, stability, and diversification. However, at the same time, structural issues such as low yields on RMB assets and insufficient domestic demand remain significant constraints affecting further allocation by foreign capital.
The Underlying Logic of Moving from &#34;Optional&#34; to &#34;Essential&#34;
&#34;Becoming an optional choice is already a significant achievement.&#34; Ding Shuang, Managing Director and Chief Economist for Greater China and North Asia at Standard Chartered Bank, stated at the meeting that a few years ago, international investors regarded Chinese assets as &#34;non-investable,&#34; but this perception has been undergoing a noticeable change in recent years.
In his view, this renewed interest primarily stems from changes in the external environment. Geopolitical risks and rising global economic uncertainties have led some investors to start looking for a &#34;safe haven,&#34; and RMB assets have gradually entered this vision. At the same time, China's continued investment in technology and industry is beginning to show results, particularly in areas such as artificial intelligence and new energy, bringing new expectations for returns.
Deeper support still lies in the macro fundamentals. Ding Shuang pointed out that China's economy has maintained a medium-speed growth of about 5% over the past few years, with a relatively stable policy orientation that emphasizes cross-cycle adjustments rather than strong stimulus; meanwhile, the industrial structure is upgrading from traditional sectors to high-end manufacturing and services, &#34;high-quality development corresponds to the supply of high-quality assets.&#34;
In addition to returns, exchange rate stability is also seen as one of the key factors. &#34;What investors ultimately care about is the risk-adjusted return, and the stability or potential appreciation of the RMB exchange rate has a significant impact on this return,&#34; Ding Shuang said.
Shu Chang, Chief Economist for Bloomberg Asia-Pacific, pointed out that by the end of 2025, the scale of China's bond market is expected to approach 200 trillion yuan, making it the second-largest bond market in the world. &#34;The scale makes Chinese assets impossible to ignore, but more importantly, it has shifted from passive allocation to active allocation.&#34;
She emphasized that the performance of assets is supported by changes in the economic structure. According to Bloomberg's estimates, by 2026, the contribution of China's high-tech industry to GDP is expected to exceed that of real estate for the first time, indicating a fundamental shift in growth momentum. &#34;New drivers such as technology and green transformation provide more sustainable underlying support for assets.&#34;
At the same time, changes in the external environment are reshaping the logic of global asset allocation. Shu Chang pointed out that concerns in the market have risen regarding the sustainability of U.S. assets, policy uncertainty, and the safety of funds in extreme scenarios. &#34;This has created a new allocation window for Chinese assets, which have a complete industrial chain and strong policy stability.&#34;
Morgan Stanley's Chief Economist for China, Xing Ziqiang, summarized this trend as &#34;an inevitable result of diversified allocation.&#34; He stated that under the macro pattern of &#34;stability in the East and fluctuations in the West,&#34; global investors are gradually reducing their dependence on single U.S. dollar assets, and Chinese assets are expected to continue attracting capital inflows during the reallocation process.
Opportunities and Challenges: Yield Remains a Key Variable
Although a consensus is forming, participants repeatedly emphasized that the attractiveness of Chinese assets still faces practical constraints.
&#34;Opportunities and challenges coexist.&#34; Xing Ziqiang bluntly stated that the core issue at present is the low yield of RMB assets, which is constrained by insufficient domestic demand and a low inflation environment.
He pointed out that although China has the potential for &#34;starry seas&#34; in technological innovation and industrial upgrading, without support from the consumption side, corporate profits are difficult to improve comprehensively, and asset returns are unlikely to increase significantly. &#34;The capital market is ultimately a 'barometer' of macro fundamentals and cannot operate independently of the fundamentals.&#34;
Xing Ziqiang further emphasized that enhancing consumption capacity needs to start from the income distribution structure, especially by reducing the precautionary savings motive of the middle and low-income groups through social security and transfer payment mechanisms, thereby releasing consumption potential. &#34;Only by achieving 'walking on two legs' of technological innovation and improving people's livelihoods can we truly enhance the long-term attractiveness of RMB assets.&#34;
Ding Shuang also mentioned that foreign investment in Chinese bonds is still constrained by yield levels. Over the past year, some foreign investors have shown a net reduction in their holdings of Chinese bonds. However, he believes that as price indicators gradually recover, corporate profits improve, and the RMB potentially appreciates, the long-term yield center is expected to rise.
Institutional Opening: From &#34;Channel&#34; to &#34;System&#34;
Beyond asset attractiveness, changes in the institutional environment are seen as another key variable.
Shu Chang pointed out that the opening of China's interbank market is transitioning from early &#34;channel-based opening&#34; to &#34;institutional opening.&#34; The introduction of mechanisms such as Bond Connect, Swap Connect, and bond repurchase not only provides entry channels for foreign investors but also simultaneously improves risk management tools and liquidity support.
&#34;Bond Connect provides a channel for foreign investors to participate in the Chinese bond market, Swap Connect offers risk management tools for investors, and the repurchase mechanism enhances the efficiency of fund utilization. This is a gradually improving system,&#34; she said.
Ding Shuang added from the perspective of policy implementation that in recent years, regulatory authorities have continuously optimized market access, trading mechanisms, and cross-border rules, while placing great importance on communication with foreign investors to address specific &#34;bottlenecks.&#34; For example, fully recognizing internationally accepted repurchase agreements, allowing foreign institutions to participate in domestic bond repurchases, and optimizing the Swap Connect mechanism have all significantly improved market convenience and certainty
However, from a longer-term perspective, the opening of the capital account remains a key element. Ding Shuang stated that China has a strong balance of payments foundation, especially with a continuous surplus in the current account, which provides space for the gradual opening of capital projects. It is expected that in the future, progress will be made along a prudent and gradual path to create conditions for the normalization of foreign capital allocation.
Xing Ziqiang also pointed out that while financial opening and market reform are indeed important, &#34;the fundamental factors ultimately determine whether capital will enter on a large scale.&#34; Currently, foreign investors' confidence in the Chinese market has significantly improved compared to two years ago, but it still requires time to verify in terms of profitability and demand recovery.
Deeply Integrating into the Global Landscape: The Real Demands of Foreign Capital
Looking ahead, several participants at the conference provided feedback from the front lines, outlining the specific demands of foreign institutions.
Ding Shuang indicated that the three main concerns of current foreign investors include: first, the risk hedging tools are still insufficient, with strong expectations for the launch of government bond futures and interest rate options products; second, there is still room for improvement in the applicability of RMB bonds as collateral; third, tax policies need to be further clarified and institutionalized to allow investors to more accurately calculate long-term returns.
Shu Chang proposed four suggestions: including optimizing the connection and process efficiency of the interconnectivity mechanisms, enriching risk management tools, attracting more international market makers and long-term funds to participate, and promoting the alignment and mutual recognition of cross-market rules to enhance the global accessibility and liquidity of Chinese bonds.
On a more macro level, Xing Ziqiang believes that foreign institutions can play a greater role in two directions: first, &#34;telling the Chinese story well,&#34; helping global investors form a more comprehensive understanding through micro-level industry and enterprise cases; second, serving Chinese enterprises in &#34;going global,&#34; providing financial support and risk management in the process of globalization.
(This article is from Yicai Global)

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Against the backdrop of the restructuring of the global economic and financial landscape, Chinese assets are being repriced, gradually shifting from "optional" to "mandatory." Chief economists from foreign institutions point out that geopolitical uncertainties and increased volatility of traditional core assets have made Chinese assets an important part of global investors' allocations. Although the low yield of RMB assets and insufficient domestic demand remain constraints for foreign investment, China's continued investment in technology and industry, along with moderate economic growth, has boosted investor confidence

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Chinese assets transition from "optional" to "mandatory": reshaping the logic of global capital reallocation