Chinese convertible bonds outperform U.S. market in 2025

Chinese companies are seeing a surge in interest from investors, especially in convertible bonds. These bonds, which are a mix of debt and equity, are currently leading the global market, which is worth about $400 billion. The ICE BofA Asia Convertible Index, mainly made up of Chinese issuers, has risen more than 10% this year. In contrast, U.S. convertible bonds have seen a slight decline of around 1%. The success of Chinese firms like Alibaba and Xiaomi is boosting optimism, particularly regarding advancements in artificial intelligence. The Nasdaq Golden Dragon China Index, which tracks Chinese stocks, has increased by 24%, while the Nasdaq 100 Index has fallen by 7%. Alibaba has been particularly active in this market, issuing $5 billion in convertible bonds. It is now the most traded name in this sector, with trading volumes significantly higher than U.S. competitors. Additionally, there is growing interest in American Depositary Receipts (ADRs) backed by Asian companies, which now represent about 5% of the global market. Experts, like Michael Youngworth from Bank of America, suggest that the prominence of Chinese convertible bonds makes them an important investment opportunity. While more investors are getting involved, there are still risks, including geopolitical tensions related to U.S. tariffs and potential threats to U.S.-listed Chinese companies.