According to research from Gavekal Research, China's government bonds have demonstrated resilience following recent geopolitical shocks, including the Iran conflict, positioning them as a viable alternative reserve asset. The report challenges a core assumption in global reserve management that US Treasuries and the US dollar are the ultimate safe havens. Analysts Charles Gave and Louis-Vincent Gave noted in a Tuesday report that Chinese sovereign bonds held firm during recent tensions in the Middle East. The report highlighted that China's long-duration government bonds rose in the year following the COVID-19 outbreak and remained relatively stable in the 12 months after the Ukraine war began. In contrast, US Treasury performance, adjusted for exchange rate movements and gold prices, appeared less impressive. The report also suggested that the strength of Chinese sovereign debt stems from the country's ability to produce more electricity at lower costs than any other nation, insulating its bond market from oil-driven inflation shocks. Strategists pointed out that since 2012, Chinese bonds have been one of the few fixed-income markets to outperform US inflation. Gavekal indicated that China's dominant position as a global industrial and trade superpower further supports the appeal of its sovereign debt as a reserve asset. This industrial strength suggests that the era of currency undervaluation may be coming to an end. The analysts wrote that in an inflationary world, policies favoring tariffs and maintaining significantly undervalued exchange rates might be set aside. Instead, what may emerge are trade agreements—more solar panels exported to the US, freer flows of rare earths, and a stronger renminbi. They further noted that in such a scenario, marginal buyers would shift from gold and US Treasuries to renminbi and other yield-bearing assets denominated in Asian currencies.