China is doing poorly economically, but its debt conquers the markets. Why?
While its factories slow down, consumption stagnates and housing prices continue to decline, International demand for Chinese sovereign debt soars. In less than a month, Beijing has managed to place 8 billion in international bonds, first in dollars and then in euros, with a record oversubscription.
On European financial floors, investors are rushing into Chinese bonds as if they were gold. And meanwhile, more than 8,000 kilometers away, in provinces such as Shandong or Hebei, many production chains remain at half speed and unsold developments multiply on the landscape.
The Chinese economy has shown clear signs of fatigue during 2025. Until October, investment in fixed assets fell 1.7%, its worst figure since 2020. The real estate sector accumulated a fall of 14.7%, reflecting a prolonged adjustment that already affects several quarters. Industrial production lost momentum and Exports fell for the first time in almost two yearsaffected by lower external demand and tensions with the United States. According to Julius Baer, the slowdown will become even more pronounced in the final stretch of the year. But, even so, international markets maintain their bet on Chinese debt.
Record demand for Chinese bonds in Europe
The latest placement in euros has been quite a sign. On November 18, China’s Ministry of Finance managed to raise 4,000 million euros in European markets, with a demand of more than 104,000 million. That figure represents more than 26 times the amount offered.
The issue was structured in two tranches, four and seven years. In the first, China offered a return of 3.45% and 3.75% in the second. These are figures that, without being particularly high, were more than enough to attract large institutional buyerstaking into account the stability of the issuer and the rate environment in Europe.
In fact, strong demand has made it possible to reduce financing costs. The final interest rates were well below the initial forecasts. The yield on the four-year bond was set just five basis points above the market reference rate, and that on the seven-year bond only thirteen points above. According to Bloomberg data, it is the largest demand that China has received in a euro issue since it began operating in this market.
This appetite is not new
Two weeks earlier, China had carried out an identical operation in dollars, also for 4,000 million, and managed to attract almost 30 times the expected demand. In both cases, the main buyers were central banks, sovereign funds and insurers. More than 40% of allocations were concentrated in these types of investors, compared to 11% the previous year. At the same time, Asian participation fell from 68% to 50%, suggesting a shift in the center of gravity of the appetite for Chinese bonds.
For many institutional portfolio managers, euro-denominated assets offer comparative advantages at a time of strong global volatility. Added to that is the attractiveness of a stable currency and credit spreads that remain compressed compared to other emerging issuers. Furthermore, the rate policy in Europe and the low yield on corporate debt make sovereign bonds from countries with fiscal stability such as China especially interesting.
A financial strategy designed to reinforce geostrategic power
The issue in euros also responds to a long-term ambition. For years, Beijing has sought to build a deep yield curve in international markets and generate clear references for future corporate issues. It is not just about raising financing, but about establishing a financial framework that allows Chinese companies to issue global debt under better conditions. To build this architecture, China has opted for regular emissions in various currencies.
That move dovetails with a more structural change. Although in the short term the economy shows signs of weakness, The Chinese government maintains its commitment to a more stable modelbased on energy investment, technological development and industrial self-sufficiency.
Investment figures in nuclear energy, renewables and coal continue to grow, while the construction of infrastructure linked to the deployment of data centers and artificial intelligence accelerates. On this front, the country is expanding capabilities that, according to Goldman Sachs, could triple the energy power Available for data centers globally by 2030.
The contrast is evident. On the one hand, key indicators such as consumption, retail sales and business confidence continue to weaken. On the other hand, sovereign debt issues achieve an overwhelming reception among institutional investors. That disconnect can be interpreted as a sign that markets are looking beyond the immediate economic cycle. The bet appears to center on China’s ability to maintain its financial strength amid an adverse domestic environment.
Nor should we overlook the diplomatic component. Through these emissions, China reinforces its geoeconomic influence in the markets where it operates. In Europe, the current context of energy fragmentation, trade tensions with the United States and the need for investment offers fertile ground for Beijing to expand its financial presence.
