“When Loans Are No Longer the Sole Protagonist of Credit” — Dr Zhou Yuanfan, Chairman of the Board of Anrong (Hong Kong) Credit Ratings, Interviewed by Economic Observer

On August 14, Economic Observer interviewed Dr Zhou Yuanfan, Chairman of the Board of Anrong (Hong Kong) Credit Ratings Co., Ltd. The interview was subsequently published in an article titled “When Loans Are No Longer the Sole Protagonist of Credit” in Economic Observer and on the Economic Observer website. Focusing on China’s profound transition in financial structure from the “era of loans” to the “era of bonds,” Dr Zhou provided incisive analysis and judgment on how bonds have evolved from simple financing instruments into hubs of the financial system connecting fiscal policy, banks, central banks, and cross-border liquidity. His insights not only reveal the structural transformation currently underway in China’s financial markets, but also offer important guidance for market participants seeking to understand the evolution of credit pricing, risk transmission, and policy frameworks.

Dr Zhou first pointed out that China’s financial landscape is undergoing a profound and systemic reshaping beneath seemingly calm waters. The central bank has explicitly proposed to “reduce the focus on loans as a single financing channel.” This statement is not a temporary adjustment in wording, but a formal acknowledgement of major changes in the financing structure. From 2019 to 2025, the share of loans in incremental aggregate social financing declined from approximately 66% to 45%, while the share of bond financing rose from approximately 31% to 46%. In the first seven months of 2026, combined net financing from government and corporate bonds had already slightly exceeded the increase in RMB loans to the real economy. Against this backdrop, Dr Zhou profoundly explained the essential significance of the transformation in bond functions.

Dr Zhou observed that when financing instruments, monetary-creation assets, central-bank operational instruments, liquidity collateral, and credit-pricing vehicles are layered together, bonds cease to be merely a tool within one segment of the financial system. They begin to become an axis. The significance of an axis does not lie in whether it is the largest, but in whether it connects enough components. Today, China’s bond market system is connecting fiscal policy, banks, the central bank, corporate credit, and cross-border liquidity. If the most important axis of China’s financial system over the past two decades was bank lending, another axis is now slowly turning: the increasingly visible “era of bonds.” This does not mean that debt is simply increasing, or that bonds are replacing banks; rather, it means that bonds are moving from being financing instruments toward becoming common hubs of the financial system. More vividly, China’s financial market has already upgraded from the traditional “single-door model” to a more internationalised “double-door (parent-and-child door) model.” Admittedly, this bond axis is not yet thick; banks remain the principal axis of China’s financial system, and the role of RMB bonds as international collateral has only just begun—but the axis has started to turn.

Using the elegant metaphor of an “axis,” Dr Zhou accurately described the central role of bonds in China’s financial system. Once this axis is established, price signals will no longer be merely ex post outcomes; they will become forward-looking risk dashboards. The credit risks carried by the bond market will be reflected in real time through yield curves, credit spreads, and term premiums, mirroring changes in macroeconomic conditions.

Dr Zhou believes that long-term government bond yields reflect not only expectations for policy rates, but also changes in growth, inflation, fiscal financing, bond supply, term premiums, and investor risk preferences. Therefore, even if the central bank keeps policy rates unchanged, long-end yields may still adjust significantly through market repricing, further affecting corporate financing and asset prices. Growth, inflation, fiscal financing, bond supply, term premiums, and investors’ views of the future will ultimately all be written into the yield curve. The bond market is therefore not merely a place that receives monetary policy; it can also, in turn, shape financial conditions. This does not mean that China has already entered an era dominated by bonds. Loans remain the main pillar of the credit system, but bonds are gaining increasing influence: they not only absorb financing demand, but also increasingly participate in monetary creation, liquidity management, and risk pricing. Changes in bank lending are not readily visible, and credit problems often first remain within internal bank ratings, non-performing loans, and capital consumption. Bonds are different. Once more corporate financing enters the market, credit and liquidity premiums are added in real time on top of benchmark interest rates. Whether macroeconomic inflation, fiscal demand, or fluctuations in corporate cash flows, all may be reflected in bond prices.

Dr Zhou’s analysis deeply reveals the inherent logic of the bond market’s “self-pricing and reverse transmission.” When credit moves from bank balance sheets to public markets, risks are no longer concealed in internal ratings and capital provisions, but are directly written into the price of every bond. This shift places entirely new demands on China’s financial regulation, monetary policy framework, and investors’ risk management. At the end of the interview, Dr Zhou used a humorous yet thought-provoking remark to encourage the market to reconsider the essential definition and boundaries of bonds:

At the end of the interview, Dr Zhou remarked with a smile: The most important characteristic of a “Bond” is “IOU.” It does not mean “I love you,” but rather “I owe you”! He raised several questions worthy of readers’ careful consideration: Are bank wealth-management products bonds? Are short-term financing notes bonds? Are super-short-term financing notes bonds? Are debt investment plans and REITs (real estate investment trusts) bonds? Whether the answer is yes or no, what difference does it make to the statistical analysis and policy implications for China’s financial market?

Through this insightful question, Dr Zhou extended the interview’s discussion from macro structures to micro definitions. As the “era of bonds” gradually approaches, clarifying the boundaries of bonds concerns not only the accuracy of statistical standards, but also directly affects monetary policy transmission, financial risk monitoring, and the effectiveness of regulatory policies. Anrong Credit Ratings will continue to monitor the development and transformation of China’s bond market, providing market participants with in-depth analysis and valuable reference from a professional and independent credit-rating perspective, and contributing to the steady and sustained advancement of China’s financial system amid structural transformation.