Chinese assets become a safe haven amid US-Iran conflict, with the Renminbi cross-border payment system surpassing 1.2 trillion yuan in a single day

Ask AI · How the Israel–Palestine conflict is reshaping the global asset safe-haven landscape?

Meiri Reporter: Lansuying Meiri Editor: Wang Jiaqing

Crude oil rises, everything falls.

Since the U.S.-Israel military strike on Iran on February 28, nearly all asset classes including global stocks, gold, U.S. bonds, Japanese bonds, and others have experienced sharp declines and sell-offs.

When traditional safe-haven assets represented by U.S. Treasuries lose their safe-haven function, global investors have turned their focus to China.

Over the past month, not only have Chinese government bond yields remained stable, but the renminbi has also appreciated against the trend.

Meanwhile, the renminbi’s role in payments has also significantly increased. In March, the daily transaction volume of the Cross-Border Interbank Payment System (CIPS) reached 920.5 billion yuan, the highest in the past 12 months, and on April 2, the daily volume further rose to 1.22 trillion yuan.

Standard Chartered Bank told the Daily Economic News (hereinafter referred to as Meiri Reporter): “A portion of Middle Eastern funds have already flowed into the Chinese market in the short term.”

Renminbi assets are becoming the new “safe haven” amid this Middle East crisis.

U.S. debt sold off over $90 billion in five weeks, renminbi bonds in hot demand

Data from the Federal Reserve shows that since one week before the outbreak of the U.S.-Israel-Iran conflict, foreign official institutions have been net sellers of U.S. Treasuries for five consecutive weeks, with a total sell-off of $90.9 billion. The custody holdings of U.S. Treasuries, a key indicator of foreign official demand, have fallen to their lowest level since 2012.

As of February 18, 2026, foreign accounts held $2.803 trillion in U.S. Treasuries at the Federal Reserve. By March 25, this had decreased to $2.712 trillion.

Megan Swiber, Chief Investment Strategist at Bank of America, bluntly stated, “Middle Eastern oil-exporting countries may be one of the main sources of this round of U.S. Treasury sell-offs.” Middle Eastern oil exporters hold about 3.5% of U.S. Treasuries, totaling slightly over $300 billion. Saudi Arabia is one of the major Middle Eastern oil exporters holding U.S. Treasuries.

Brad Setser, Senior Fellow for International Economics at the Council on Foreign Relations, pointed out that “Turkey, India, Thailand, and other oil-importing countries are also major players in this round of Treasury sell-offs.” Since February 27, the Central Bank of Turkey has reduced about $22 billion in foreign government bonds from its foreign exchange reserves, most of which are U.S. Treasuries.

Foreign selling has sharply pushed up Treasury yields. As of 7 p.m. Beijing time on April 3, the yield on the 10-year U.S. Treasury note surged approximately 37 basis points since the conflict’s outbreak to 4.321%.

In addition to U.S. Treasuries, yields on major bonds from the UK, Germany, Japan, and others also rose sharply during the conflict.

Wang Xin Jie, Chief Investment Strategist at Standard Chartered China Wealth Solutions, told Meiri Reporter: “Global inflation expectations are rising, making it difficult for monetary policies in the U.S. and other developed markets to remain accommodative. In an environment where fiscal policies are stretched thin worldwide, limited room for monetary easing has led to rising yields on assets including U.S. Treasuries and increased volatility in global stock markets.”

Unlike the dramatic fluctuations in other bond markets globally, Chinese government bond yields have remained relatively stable. Since the outbreak of the U.S.-Israel-Iran conflict, the 10-year Chinese government bond yield has only risen slightly by 1.4 basis points, and as of 7 p.m. on April 3, it stood at 1.835%, making it a rare stable asset in the global market.

Offshore renminbi bond markets have also seen a surge in subscriptions.

On March 5, the Hong Kong Monetary Authority reopened a 1-year RMB-denominated government agency bond. The issuance size was 1 billion yuan, with total bids reaching 11.4 billion yuan, a subscription multiple of 11.40 times, reflecting strong market demand. The average winning price was 100.18, corresponding to an annualized yield of 1.358%. The high subscription volume at low yields fully demonstrates international investors’ strong demand for offshore renminbi bonds.

On the same day, the HKMA also reopened a 5-year RMB government agency bond, with an issuance size of 1.25 billion yuan, and total bids of 10.88 billion yuan, a subscription multiple of 8.70 times. The average winning price was 101.27, with an annualized yield of 1.661%.

Wang Xin Jie told Meiri Reporter, “From historical experience, when Middle Eastern countries face geopolitical risks, they tend to seek more diversified and long-term regional allocations to better hedge risks.”

Jacky Tang, Chief Investment Officer for Emerging Markets at Deutsche Bank Private Bank, explained to Meiri Reporter that the Iran and Strait of Hormuz crisis is a supply-driven inflation shock rather than demand-driven, which increases inflation risk premiums and causes volatility in real yields, thereby weakening the performance of traditional safe-haven assets like U.S. Treasuries and gold. The divergence in the trends of Chinese and U.S. Treasuries reflects a failure in traditional safe-haven asset pricing, while Chinese assets have undergone a new revaluation under policy anchoring.

CIPS’ average daily transaction volume hit a 12-month high in March

In the foreign exchange market, the renminbi has also shown strong resilience.

In the month ending April 3, the U.S. dollar index experienced a phased strengthening, with currencies of developed economies such as the euro, Canadian dollar, Swiss franc, Japanese yen, and Korean won generally under pressure. The Korean won against the dollar even briefly fell below 1,530. The Japanese yen was very weak, falling below 160 on March 27. Even the traditional “safe-haven currency,” the Swiss franc, did not show obvious strength, depreciating 2.06% against the dollar.

However, during this period, the renminbi was the only major currency to appreciate against the dollar, with the exchange rate at 6.8842 per dollar as of 7 p.m. on April 3.

Behind the stable exchange rate is the rising global payment role of the renminbi.

Data from the Cross-Border Interbank Payment System (CIPS) shows that the system’s transaction volume in March hit a 12-month high, with an average daily transaction volume of 920.5 billion yuan, and 35.74k transaction cases, a significant increase from 8B yuan and 25.93k cases in February.

On April 2, the daily transaction volume further rose to 1.22 trillion yuan, with nearly 42k transactions.

Three structural advantages make Chinese assets a new “safe haven”

The core reasons why Chinese assets can become a global safe haven are energy security, policy stability, and strong economic fundamentals.

Deng Zhijie told Meiri Reporter that China has a mature energy security policy framework, with abundant domestic coal resources and diversified oil and gas import channels covering Russia, Central Asia, and other regions. Its strategic petroleum reserves can support over 100 days of supply.

Unlike Japan and South Korea, which depend on energy imports for 80% to 95% of their needs, the diversification of oil and gas sources allows China to minimize supply chain shocks.

Moreover, China’s large renewable energy system also significantly dilutes the impact of rising fuel costs. Data shows that nuclear, wind, solar, hydro, and other renewable and alternative energies now account for 40% of China’s total power generation, up from 26% ten years ago.

Another major advantage of China is policy predictability.

Wang Xin Jie told Meiri Reporter that, compared to the uncertainty of U.S. monetary policy, China does not face inflation issues and maintains a moderately accommodative monetary policy, leaving ample room. Therefore, even if oil prices remain high in the future, China has more monetary space to hedge against this impact.

Deng Zhijie also expressed similar views, stating that global assets are re-pricing inflation and policy uncertainties, while Chinese assets are re-pricing earnings risks within a more predictable macro framework with stronger policy support. Chinese assets are becoming relatively stable, playing a role as low-volatility allocations. When traditional hedging tools fail, Chinese assets offer diversification value.

Looking ahead, Wang Xin Jie summarized, “We believe this trend will continue long-term, but the underlying logic is not purely safe-haven, rather a rebalancing of global funds and ongoing inflows driven by seeking diversified allocations.”

Disclaimer: The content and data in this article are for reference only and do not constitute investment advice. Please verify before use. Operate at your own risk.

Daily Economic News