Rising crude oil prices have triggered a broad decline across other asset classes. Since the United States and Israel launched military strikes against Iran on February 28th, global stock markets, gold, U.S. Treasuries, Japanese government bonds, and various other assets have experienced significant declines and widespread selling.
As the safe-haven function of traditional assets, represented by U.S. Treasuries, falters, global investors are increasingly turning their allocation focus towards China. Over the past month, not only have Chinese government bond yields remained stable, but the Renminbi has also appreciated against the trend.
Concurrently, the Renminbi's role in global payments has significantly strengthened. In March, the average daily transaction volume on China's Cross-Border Interbank Payment System (CIPS) reached 920.5 billion yuan, the highest level in the past 12 months. Furthermore, on April 2nd, the single-day transaction volume climbed further to 1.22 trillion yuan.
Standard Chartered Bank disclosed that a portion of Middle Eastern capital has already flowed into the Chinese market in the short term. Renminbi-denominated assets are becoming a new "safe haven" amidst the ongoing Middle Eastern crisis.
U.S. Treasuries have witnessed over $90 billion in selling over five consecutive weeks, while Renminbi bonds are attracting strong demand. Data from the Federal Reserve shows that starting the week before the U.S.-Israel-Iran conflict erupted, foreign official institutions have been net sellers of U.S. Treasuries for five weeks straight, with cumulative sales reaching $90.9 billion. The custody holdings of U.S. Treasuries, an indicator of foreign official demand, have fallen to their lowest level since 2012.
As of February 18th, 2026, foreign accounts held $2.803 trillion in U.S. Treasury securities at Federal Reserve Banks. By March 25th, this amount had decreased to $2.712 trillion.
Meghan Swiber, an interest rate strategist at Bank of America, stated directly that Middle Eastern oil exporters are likely a significant source of this round of Treasury selling. Middle Eastern oil exporters hold approximately 3.5% of the total outstanding U.S. debt, amounting to slightly over $300 billion. Saudi Arabia is one of the major Middle Eastern oil-exporting holders of U.S. Treasuries.
Brad Setser, a senior fellow at the Council on Foreign Relations, pointed out that oil-importing countries like Turkey, India, and Thailand are also major participants in this sell-off. Since February 27th, the Turkish central bank has reduced its foreign government bond holdings, predominantly U.S. Treasuries, by approximately $22 billion from its foreign exchange reserves.
The substantial foreign selling has significantly pushed up U.S. Treasury yields. As of 7:00 PM Beijing Time on April 3rd, the yield on the benchmark 10-year U.S. Treasury note had surged about 37 basis points since the conflict began, reaching 4.321% (bond prices and yields move inversely).
Beyond U.S. Treasuries, the yields on major government bonds from the UK, Germany, and Japan have also risen sharply during the U.S.-Israel-Iran conflict.
Wang Xinjie, Chief Investment Strategist for Wealth Solutions at Standard Chartered China, commented, "Rising global inflation expectations have made sustained monetary policy easing in the U.S. and other developed markets difficult. In an environment where fiscal policy is constrained globally, the limited room for monetary easing has further contributed to rising yields, including on U.S. Treasuries, and increased volatility in global stock markets."
In contrast to the sharp volatility in other global bond markets, Chinese government bond yields have shown relative stability. The yield on the 10-year Chinese government bond has increased by only 1.4 basis points since the conflict started, standing at 1.835% as of 7:00 PM Beijing Time on April 3rd, making it a rare stable asset in the global market.
The offshore Renminbi bond market has also experienced a surge in subscriptions. On March 5th, the Hong Kong Monetary Authority reopened the tender for 1-year Renminbi government institutional bonds. Tender results showed an issuance size of 1 billion yuan, with total application amounts reaching 11.4 billion yuan, resulting in a high subscription multiple of 11.40 times, indicating strong market appetite. The average accepted price was 100.18, corresponding to an annualized yield of 1.358%. The exceptionally high subscription level despite the low yield fully demonstrates robust international investor demand for allocating to offshore Renminbi bonds.
On the same day, the reopened tender for 5-year Renminbi government institutional bonds by the Hong Kong Monetary Authority was also met with strong market enthusiasm. This issuance had a size of 1.25 billion yuan, with total applications amounting to 10.88 billion yuan, yielding a subscription multiple of 8.70 times. The average accepted price was 101.27, with an annualized yield of 1.661%.
Wang Xinjie noted, "Historical experience shows that when Middle Eastern countries face geopolitical risks, they seek more diversified and long-term regional allocations to better withstand such risks."
Jacky Tang, Emerging Markets Chief Investment Officer for International Private Banking at Deutsche Bank, explained that the Iran and Strait of Hormuz crisis represents a supply-driven inflationary shock, rather than a demand shock. It elevates inflation risk premiums, leading to heightened volatility in real yields, thereby weakening the performance of traditional safe-haven assets like U.S. Treasuries and gold. The divergence in performance between Chinese and U.S. government bonds reflects the failure of traditional safe-haven asset pricing, while Chinese assets have undergone a new round of repricing underpinned by supportive policies.
In the foreign exchange market, the Renminbi has also demonstrated remarkable resilience. Over the month leading to April 3rd, while the U.S. dollar index strengthened phase, currencies of developed economies like the Euro, Canadian Dollar, Swiss Franc, Japanese Yen, and South Korean Won generally faced downward pressure. The South Korean Won briefly fell past the 1530 level against the U.S. dollar. The Japanese Yen was particularly weak, breaking through the 160 level on March 27th. Even the traditional "safe-haven currency," the Swiss Franc, did not show significant strength, depreciating by 2.06% against the U.S. dollar.
During this period, however, the Renminbi was the only major currency to appreciate against the U.S. dollar, trading at 6.8842 per dollar as of 7:00 PM Beijing Time on April 3rd.
Behind the stable exchange rate lies the elevated status of the Renminbi in global payments. Data from the Cross-Border Interbank Payment System (CIPS) operator's website shows that the average daily transaction value processed by CIPS in March hit a 12-month peak, reaching 920.5 billion yuan, with the number of transactions reaching 35,740. This represents a significant increase from February's 619.7 billion yuan and 25,930 transactions. On April 2nd alone, the transaction value climbed further to 1.22 trillion yuan, with nearly 42,000 transactions processed.
Three key structural advantages are enabling Chinese assets to become the new "safe haven": energy security, policy stability, and sound economic fundamentals.
Jacky Tang analyzed that China possesses a mature energy security policy framework. It not only has ample domestic coal resources but also diversified import channels for oil and gas covering regions like Russia and Central Asia. Its strategic petroleum reserve can support consumption for over 100 days. Unlike Japan and South Korea, which rely on imports for 80% to 95% of their energy needs, China's diversified sources of oil and gas minimize supply chain shocks. Moreover, China's vast renewable energy system significantly dilutes the impact of rising fuel costs. Data indicates that renewable and alternative energy sources, including nuclear, wind, solar, and hydropower, now account for 40% of China's total electricity generation, a substantial increase from 26% a decade ago.
Another major advantage for China is policy predictability. Wang Xinjie stated that, on the policy front, in stark contrast to the uncertainty surrounding U.S. monetary policy, China does not face an inflation problem. Its monetary policy remains appropriately accommodative with ample room for maneuver. Therefore, even if oil prices remain high going forward, China has more monetary policy space to cushion the impact.
Jacky Tang expressed a similar view, stating that while global assets are repricing for inflation and policy uncertainty, Chinese assets are repricing earnings risk within a more predictable macro framework with stronger policy support. Chinese assets are becoming relative stabilizers, playing a role as low-volatility allocations. They offer diversification value when traditional hedging tools fail.
Looking ahead, Wang Xinjie concluded, "We believe this trend will continue in the long term. However, the underlying logic is not solely about safe-haven flows, but rather a global rebalancing of funds and sustained inflows driven by the search for diversified allocations."
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