In 2023, the bond market grew stably, with treasury yields generally fluctuating downwards. The high-quality opening-up of the bond market saw steady progress, with the composition of investors remaining diversified. Money market trading continued to grow while interbank derivatives turnover maintained growth. Major stock indexes dropped.

1. The bond market maintained stable growth

In 2023, the bond market saw a total issuance of RMB71.0 trillion, up by 14.8 percent year on year. Specifically, RMB61.4 trillion of bonds were issued in the interbank bond market, while issuances in the exchange-traded bond market totaled RMB9.6 trillion. In 2023, the issuances of treasury bonds, local government bonds, financial bonds, corporate credit bonds,1 credit asset-backed securities, and interbank certificates of deposit (CDs) reached RMB11.0 trillion, RMB9.3 trillion, RMB10.2 trillion, RMB14.0 trillion, RMB348.52 billion, and RMB25.8 trillion, respectively.

As of end-2023, outstanding bonds in custody in the bond market increased by RMB9.1 percent year on year to reach RMB157.9 trillion, including RMB137.0 trillion in the interbank bond market and RMB20.9 trillion in the exchange-traded bond market. Commercial bank over-the-counter (OTC) bonds in custody recorded an outstanding amount of RMB57.75 billion.

2. Treasury yields generally fluctuated downwards

At end-2023, the yields on 1-year, 3-year, 5-year, 7-year and 10-year treasury bonds stood at 2.08 percent, 2.29 percent, 2.40 percent, 2.53 percent and 2.56 percent, down by 2bps, 11bps, 24bps, 29bps and 28bps year on year, respectively. At end-2023, the China Bond Treasury Bond Aggregate Index closed at 224.5, up by 10.8 year on year; and the ChinaBond New Composite Index (Full Price) closed at 124.6, up by 2.5 year on year.

Figure 1: Change in Treasury Yield Curves in 2023

In December 2023, the monthly weighted average interest rate on interbank lending was 1.78 percent, up by 52bps from a year earlier; and the monthly weighted average interest rate on pledged repos stood at 1.90 percent, up by 50bps from a year earlier.

3. The opening-up of the bond market saw steady, orderly progress

As of end-2023, overseas institutions held RMB3.72 trillion, or 2.4 percent, of the outstanding bonds in custody in China’s bond market. Specifically, their holdings in the interbank bond market amounted to RMB3.67 trillion. By bond type, overseas institutions held RMB2.29 trillion, or 62.4 percent, of treasury bonds, and RMB0.80 trillion, or 21.8 percent, of policy financial bonds.

4. The composition of investors in the bond market remained diversified

As of end-2023, by legal person status, there were 2,162 holders of debt-financing instruments issued by non-financial enterprises (“non financial debt financing instruments” for short).2 By the size of bond holdings, the top 50 investors, mainly including public funds, large state-owned commercial banks, and joint-stock commercial banks, held 50.6 percent of the total, while the top 200 investors held 82.1 percent. The biggest, smallest, average, and median numbers of holders for a non-financial debt financing instrument were 57, 1, 13, and 12, respectively, while 88 percent of non-financial debt financing instruments were each held by fewer than 20 investors. In 2023, the top 50 investors by the volume of trading of non-financial debt-financing instruments conducted 62.4 percent of the transactions. They mainly included securities companies, fund companies and joint-stock commercial banks. Transactions by the top 200 investors accounted for 89.8 percent.

5. Money market trading grew continuously

In 2023, interbank money market transactions totaled RMB1817.2 trillion, increasing by 19.0 percent year on year. Specifically, pledged repo transactions rose by 21.4 percent year on year to RMB1668.8 trillion; outright repo transactions dropped by 2.7 percent year on year to RMB5.4 trillion; and interbank lending transactions reached RMB143.0 trillion, decreasing by 2.6 percent year on year. Repo transactions of exchange-traded standard bonds grew by 12.9 percent year on year to RMB455.8 trillion.

In 2023, the total turnover of cash bond trading in the interbank bond market reached RMB307.3 trillion, with the daily average standing at RMB1234.16 billion. Most of the transactions posted a turnover between RMB5 million and RMB50 million or above RMB90 million. The average value per trade was RMB470.21 billion. The turnover of cash bond trading in the exchange-traded bond market amounted to RMB46.4 trillion, averaging RMB191.93 billion per day. A total of 1,051,000 transactions were done in the OTC bond market, with a total turnover of RMB196.14 billion. As of end-2023, OTC bond trading businesses were conducted in 30 commercial banks, two more than a year earlier.

6. Both accepted and discounted bills outstanding reminded stable

In 2023, commercial drafts that were accepted totaled RMB31.3 trillion, while those discounted amounted to RMB23.8 trillion. As of end-2023, the outstanding amount of accepted commercial drafts stood at RMB18.6 trillion, decreasing by 2.7 percent from a year earlier, while those discounted registered RMB13.3 trillion, an increase of 2.1 percent year on year.

In 2023, a total of 213,000 micro, small, and medium-sized enterprises (MSMEs) issued bills, accounting for 93.1 percent of all the issuing enterprises. Bills issued by MSMEs reached RMB20.7 trillion, representing 65.9 percent of the total issuance. Of all the enterprises that discounted bills, 320,000, or 96.5 percent, were MSMEs. The bills they discounted registered RMB17.5 trillion, accounting for 73.6 percent of the total amount of discounted bills.

7. Interbank derivatives turnover grew year on year

In 2023, interbank RMB interest rate derivatives trading saw a total turnover of RMB31.9 trillion, up 49.8 percent year on year. Specifically, notional principal amounts in interest rate swaps totaled RMB31.5 trillion, up 50.2 percent year on year; trading of standardized bond forwards saw a total turnover of RMB308.8 billion; notional principal amounts in credit risk mitigation warrants that had been created posted RMB34.7 billion; and notional principal amounts in credit default swaps reached RMB2.5 billion. Treasury futures saw a total turnover of RMB52.4 trillion, up by 12.8 percent year on year. The swap interest rates moved down. At end-2023, 1-year FR007 closed at an average of 1.99 percent, down by 19bps year on year, while 5-year FR007 closed at an average of 2.32 percent, down by 45bps year on year.

8. Major stock indexes dropped

At end-2023, the SSE Composite Index closed at 2974.9, down by 114.3 points or 3.7 percent from end-2022, while the SZSE Component Index closed at 9524.7, down by 1491.3 points or 13.5 percent from end-2022. Turnover on the Shanghai and Shenzhen Stock Exchanges totaled RMB212.2 trillion for the full year, down by 5.5 percent year-on-year.

(Sources: China Securities Regulatory Commission, China Central Depository & Clearing Co., Ltd., National Interbank Funding Center, Shanghai Clearing House, Shanghai Commercial Paper Exchange, Shanghai Commercial Paper Exchange Co., LTD., Shanghai Stock Exchange, Shenzhen Stock Exchange, and Beijing Financial Assets Exchange)