Chinese holdings of Gulf debt near $14bn as yields lure Beijing

Summary

• Chinese investors held almost $14 billion of Gulf debt by mid-2025, up from $9.6 billion a year earlier, IMF data show.
• Asian buyers retreated after China's 2021 property crisis and have returned over the past 12 to 18 months, Dubai bankers said.
• Higher yields at comparable credit ratings are pulling Chinese money toward Gulf paper as Beijing trims US Treasury exposure.

The latest

Chinese holdings of Gulf debt jumped to almost $14 billion as of mid-2025 from $9.6 billion a year earlier, according to International Monetary Fund data, a ninefold increase since mid-2017. Dubai-based bankers said higher yields on high-grade, short-to-medium-term Gulf paper are driving the inflows. Chinese banks are also taking larger roles in arranging the region's new bond sales.

Details

• The breakdown: Of the mid-2025 total, $7.8 billion was invested in the UAE, $5.3 billion in Qatar and $657 million in Saudi Arabia, according to IMF figures. By tenor, roughly $7.5 billion was short-term debt and $6.3 billion long-term, leaving Chinese exposure tilted toward paper that matures quickly.
• The return: Asian investors were active in Gulf bond markets until China's real estate crisis began in 2021, then withdrew, said Ritesh Agarwal, head of debt capital markets at Emirates NBD Capital in Dubai. He said they have come back steadily over the past 12 to 18 months, rebuilding positions the crisis forced them to unwind.
• What they buy: Agarwal said Chinese banks invest in primary bond issues from the Gulf's largest banks, sovereigns and government-related entities, with Saudi Arabia, the UAE and Qatar their preferred markets. Most purchases are concentrated in three-to-five-year maturities, and Chinese institutions typically hold the paper until maturity rather than trading it.
• The Treasury swap: Amol Shitole, head of fixed income at Mashreq Capital in Dubai, said: "China is reducing its US Treasury holdings, while the Gulf is a natural ally as China's main oil supplier." He framed Gulf debt as a partial replacement for US government paper at a similar credit rating.
• The yield case: Shitole said Abu Dhabi debt offers a higher yield than US government bonds despite a comparable credit rating, and that the emirate carries a substantially lower debt-to-GDP ratio than the United States. That combination is the core of the relative-value argument pulling Chinese institutional money into the region.
• Beyond investing: Chinese lenders are moving into arranging Gulf issuance, not only buying it. Cbonds rankings of Middle East bond bookrunners for January to August 2026 place Industrial and Commercial Bank of China 16th and Bank of China 18th, while Agricultural Bank of China, Shanghai Pudong Development Bank and CCB International were joint 29th.
• The Saudi deal: All five Chinese institutions acted as bookrunners on Saudi Arabia's $11.5 billion four-tranche sovereign bond sale in January, according to Cbonds data. Bank of China also served as a joint lead underwriter and worked on comparable sovereign debt issuances for Kuwait and Abu Dhabi.
• The oil link: Shitole's argument rests on the Gulf's role as China's main oil supplier, positioning debt flows as an extension of an existing energy relationship rather than a standalone portfolio bet. Bankers did not specify how much further Chinese allocations could rise, or over what period.

Background

Chinese holdings of Gulf debt stood near $1.5 billion equivalent in mid-2017 before the ninefold rise recorded by the IMF through mid-2025. The 2021 collapse in Chinese property financing interrupted that trajectory, pushing Asian institutional buyers out of regional bond markets for roughly three years.

Between the lines

The mid-2025 country split is the detail worth watching: Saudi Arabia is the Gulf's largest sovereign issuer yet holds just $657 million of Chinese money, far behind the UAE's $7.8 billion and Qatar's $5.3 billion. That gap sits awkwardly beside bankers' description of Saudi Arabia as a preferred market and beside Chinese banks' bookrunner roles on the January sovereign sale, suggesting arranging mandates are running ahead of balance-sheet exposure.

What's next

Watch the next IMF portfolio holdings update for whether Chinese exposure crossed $14 billion, whether Saudi holdings rose from $657 million, and whether Chinese banks climb the Cbonds Middle East bookrunner table for full-year 2026.

Source: AGBI, International Monetary Fund, Cbonds