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Bond market opening under trade conflict: The role of foreign investors in pricing

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  • Tian, Guangning
  • Wang, Nanxuan
  • Julaiti, Jiansuer
  • Li, Yipeng

Abstract

Under the strain of international trade disputes, how does the participation of foreign investors affect the pricing of China's bond market? Does it further have a real effect? Based on the trading and issuance data of Chinese bond market, this paper finds that the credit spreads of enterprise bonds held by foreign investors in China decreased significantly after the Sino-US Trade War officially started on July 6, 2018, but increased in the interbank-market compared with the exchange-market. Issuers with foreign capital investment experienced a significant decrease in their financing costs when issuing bonds in the primary market after the Sino-US Trade War. Additionally, these issuers performed better post-trade war, with increased sales revenue, heightened R&D activities, and more investment in fixed assets. Contrary to expectations, bond market opening did not transmit or amplify risks; instead, they bolstered the resilience of bond issuers.

Suggested Citation

  • Tian, Guangning & Wang, Nanxuan & Julaiti, Jiansuer & Li, Yipeng, 2025. "Bond market opening under trade conflict: The role of foreign investors in pricing," Economic Analysis and Policy, Elsevier, vol. 86(C), pages 636-652.
    • Handle: RePEc:eee:ecanpo:v:86:y:2025:i:c:p:636-652
    DOI: 10.1016/j.eap.2025.03.015
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