Financial institutions in China are being warned that by purchasing Chinese government bonds, they are essentially betting against the strength of the Chinese economy. Recent reports from industry sources and experts suggest that this practice is akin to shorting the Chinese yuan and could lead to increased pressure for capital outflows. The People's Bank of China has expressed concerns about the bond market and is taking steps to cool a bond rally by selling treasury bonds. The central bank is focused on maintaining a normal upward-sloping yield curve and addressing bond-market risks. By selling bonds to stabilise exchange rates and economic expectations, the central bank aims to prevent a further weakening of the yuan. This move highlights the potential risks associated with investing in Chinese government bonds and the impact it can have on the country's economy.