China’s 10-year government bond yield slipped to around 1.81% on Monday, pulling back from a five-week high as investors shifted into safe-haven assets amid rapidly intensifying conflict in the Middle East. Over the weekend, the US and Israel launched coordinated strikes on Iran that killed the country’s Supreme Leader, Ayatollah Ali Khamenei. Iran responded with attacks on US assets in neighboring states, unsettling global markets and effectively shutting the Strait of Hormuz.
As the world’s largest crude importer, China now faces mounting inflationary and growth headwinds from surging oil prices. In response to the deteriorating geopolitical backdrop, Beijing called for an immediate ceasefire and advised Chinese citizens in the region to evacuate.
At the same time, markets are closely watching China’s annual Two Sessions, held from March 4–11, where policymakers will set key economic targets and unveil the 15th Five-Year Plan for 2026–2030. Separately, the PBOC today officially reduced the foreign-exchange risk reserve ratio on forward sales from 20% to 0%, a move aimed at boosting liquidity and stabilizing capital flows.
