China Suddenly Becomes Investors' Fortress, the New Safe Haven Target

The outbreak of armed conflict in the Middle East involving Iran and the United States since late February has triggered sell-offs across nearly all global exchanges and various asset classes.

Market participants are actively adjusting portfolios to anticipate potential disruptions to energy supplies and their impacts on inflation and global economic growth rates.

Amid the volatility sweeping financial markets, Chinese assets are instead demonstrating their shine. The capital markets and bonds of that country are now beginning to be valued by global investors as hedging or safe haven investment options.

Since mid-February 2026, a phenomenon has been recorded where the movements of stocks and bonds in China have proceeded in tandem with a positively reversed correlation.

This stability is a reflection of Beijing’s long-term efforts to mitigate the risks of global commodity price shocks, particularly energy, on its domestic economy.

Foundation of Energy Resilience and Strategic Independence

Although it holds the status as one of the world’s largest oil importers, China has so far succeeded in minimising the impact from the energy crisis triggered by the effective closure of the Strait of Hormuz area, a strategic waterway serving nine percent of the world’s oil supply.

This resilience has been built through efforts to diversify the energy mix over the past several years and the accumulation of strategic reserves.

Based on global energy data, China currently holds reserves of more than 1.2 billion barrels of oil, balanced with domestic alternative energy resources such as coal, the development of renewable energy, and liquefied natural gas (LNG).

This energy structure makes China’s macroeconomic posture more adaptive to turmoil in the Middle East region. Additionally, restrictions on technology access and trade disputes with the United States since 2018 have indirectly accelerated China’s industrial independence, providing broader room for their capital markets from external sentiment.

Stability of Equity Markets Amid Global Volatility

The resilience of Chinese assets is evident in the movements of its stock market compared to major world exchanges, particularly the United States. Based on index movement data throughout early March to mid-April 2026, Chinese equities recorded lower volatility.

For illustration, the S&P 500 index in the United States experienced significant fluctuations. In early March, the S&P 500 was at the level of 6,881.62, then corrected quite deeply to touch the lowest point at 6,343.72 at the end of March due to concerns over inflation and interest rates, before finally returning to around 6,816.89 on 10 April.

In contrast, China’s benchmark blue-chip stock index, the CSI 300, showed more moderate movements. From the level of 4,728.66 in early March, this index only experienced an adjustment to the level of 4,646.15 on 13 April, recording a decline of under 2%.

The Shanghai Composite Index (SSEC) also moved within a limited range, with moderation of around five percent from the level of 4,182.59 to 3,988.55 over the same period.

Government Bonds and Relative Performance Divergence

In addition to the stock market, Chinese government bonds (CGB) also demonstrate stability at a time when traditional investment instruments, such as US government bonds (US Treasury), are experiencing sharp fluctuations. Historical data on the movement of yields for 10-year tenor bonds show a striking divergence between the two countries.

The yield on the 10-year US Treasury rose from 4.05% in early March to 4.33% in mid-April 2026. This increase in yield reflects a correction in US bond prices due to market expectations that inflationary pressures will rise again.

On the other hand, the yield on China’s 10-year bonds remained in a stable trend. From the position of 1.80% in early March, the yield slightly eased and held in the range of 1.79% in mid-April, indicating bond price appreciation driven by high buying interest.

This difference in movement direction is confirmed in more detail through relative performance data between the bonds of the two countries. In early March, the relative performance differential between Chinese government bonds (CN10Y) and US bonds (US10Y) was at the level of -3.25%.

However, as pressure escalated in global markets, this divergence consistently widened to reach -9.77% in mid-April.

This widening of the percentage differential technically indicates that China’s bond market is responding to macroeconomic turbulence independently and isolated from the selling pressure hitting the US debt market.

Capital Flow Dynamics and Future Prospects

This resilience of Chinese assets is also supported by its ownership structure. Although it holds a dominant weight in the MSCI Emerging Markets index, the proportion of foreign investor ownership in Chinese stocks and bonds is generally below 5%.

This relatively small ratio provides a natural limitation against the risk of large-scale forced selling by global investment managers during panic in international exchanges.

At the same time, adequate domestic financial system liquidity also supports asset market stability. There are also indications of portfolio adjustments from global institutional fund flows.

After placing China in an underweight position for some time, some fund managers are beginning to raise their allocations back to neutral levels. Signs of economic activity recovery and easing deflationary pressures at the factory level are also providing positive sentiment for market participants.

Looking ahead, the positive correlation formed between Chinese stocks and bonds is expected to remain an investment draw factor as long as global geopolitical uncertainty continues to influence the economic prospects of Western countries.

Although domestic issues related to the property sector and t