(Yicai) April 21 -- The allocation of global funds to Chinese yuan-denominated assets is increasing, a strong testament to the long-term resilience of the Chinese economy and the solid position of Chinese assets within the global supply chain, experts said at the London Stock Exchange Group Insight Series -- China 2026.

The global allocation of funds towards yuan assets is showing a progressive upward trend, said Wang Yan, deputy general manager of Bank of China Limited Shanghai RMB Trading Business Headquarters. This is closely related to the long-term resilience of the Chinese economy and its future development potential, and it represents a rational choice made by global funds in their allocation across major asset classes, she added.

There are three main factors driving investment in China's bond market, according to Wang. The first is that the diversification of sovereign reserve assets has led to increased investment because the stability of the yuan bond yield generation system and curve, along with its low correlation to assets such as the US dollar, has attracted reserve funds from various countries amid heightened market volatility.

The second is that the inclusion of yuan bonds in the three major international bond indices, with weights of around 10 percent, has facilitated passive fund allocation. And the third is that institutions are increasingly focusing on diversification strategies and actively investing in low-correlation non-US dollar assets, which provides more opportunities for yuan assets to be included in their portfolios.

Despite facing global headwinds, the fundamentals of the Chinese economy remain solid, said David Day, managing director for Asia-Pacific at LSEG. This is evident in areas such as economic stabilization, steadiness in key sectors, and gradually improving market confidence, he noted, adding that LSEG remains committed to enhancing the international connectivity and resilience of China's financial markets.

LSEG is steadily advancing plans for the clearing and settlement of offshore yuan foreign exchange derivatives and preparing to expand the range of eligible non-cash collateral to include offshore yuan-denominated Chinese government bonds, which are expected to be implemented after regulatory approval in the second quarter.

The key lies in the nature of the funds, as from an allocation perspective, Chinese assets are gradually becoming a global safe-haven asset, said Zhang Yingxiao, product director of fund operations at Ping An Bank. For example, investors favor Chinese government bonds during risk repricing due to their characteristics of being large in scale, having low volatility, and possessing good credit quality, he noted.

The role of the yuan should depend on the significance of Chinese assets, according to Zhu Chaoping, executive director and global market strategist at J.P. Morgan Asset Management.

Recent changes indicate that Chinese assets are becoming increasingly important, with one major aspect being their rising position within the global supply chain, which has been further strengthened by the ongoing conflict between the United States and Iran, Zhu said.

The resilience and diversification of China's supply chain have been further validated in recent geopolitical conflicts, Zhu believes. This is largely due to China's years of investment in new energy and renewable energy, which have significantly reduced its dependence on crude oil.

And this is why the impact of geopolitical conflicts on Chinese assets is notably less than that on other economies in Asia, he explained.

In this context, the supply entities that possess sustainable manufacturing competitiveness and can continuously support global technological and industrial growth will ultimately be Chinese, Zhu noted. The robust growth in related demand is expected to translate into profitability for listed companies in China, he predicted.

Editor: Futura Costaglione