A rally in Chinese government debt has sparked alarm among regulators in Beijing, who warn that regional banks’ appetite for the bonds risks a crisis similar to the collapse of Silicon Valley Bank last year.
The People’s Bank of China, which regulates the financial sector, has signalled its discomfort over the scale of the banks’ move into long-dated sovereign bonds, which are vulnerable to moves in interest rates — as was SVB’s portfolio of US Treasuries.
In the first quarter of this year, net purchases of such bonds by Chinese banks, overwhelmingly by regional lenders, totalled Rmb270bn ($37bn), according to securities market data analysed by BNP Paribas.
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