Panda bonds have become a popular tool for Chinese issuers looking to tap into global capital markets. In 2015, China's first panda bond was issued by the Export-Import Bank of China.
China's State Administration of Foreign Exchange (SAFE) has been actively promoting the development of panda bonds, providing guidance and support to issuers. The SAFE has also established a panda bond issuance framework to facilitate the process.
The China Development Bank (CDB) has been a major player in the panda bond market, issuing several large deals in recent years. The CDB's panda bond issuances have helped to set a benchmark for other issuers.
Chinese issuers have been using panda bonds to raise capital for various purposes, including infrastructure development and refinancing existing debt.
Recent Developments
Deutsche Bank placed RMB 1 billion ($147 million) in panda bonds on January 18, becoming the first foreign issuer to tap into China's onshore bond market since the regulatory reforms.
Interest rates in the West are rising, but China's falling interest rates are making its domestic bond market attractive to multinationals. China is offering borrowing rates that are half the global average.
The renminbi has rebounded from historic lows since October, but is still down 6% against the dollar over the past year. This could raise the cost of repaying local bonds.
Panda bond issuers need a credit rating from a Chinese agency, which can be a challenging process. S&P Global was approved to provide this service in 2019.
Frequently Asked Questions
How do panda bonds work?
Panda bonds are a type of bond issued by foreign firms to raise capital from domestic Chinese investors. They are a key platform for foreign companies to access China's large and growing bond market.
What is the difference between dim sum and panda bond?
Dim sum bonds are issued outside of China by foreign or Asian companies, offering higher yields, whereas panda bonds are issued within China by both foreign and domestic companies. The key difference lies in their issuance location and the companies involved.
Sources
- https://www.investopedia.com/terms/d/dim-sum-bond.asp
- https://www.adb.org/news/adb-prices-1-billion-yuan-panda-bonds-china
- https://www.aiib.org/en/news-events/news/2020/AIIB-Prices-RMB3-Billion-Inaugural-Panda-Bond.html
- https://www.businesstimes.com.sg/companies-markets/uob-issues-largest-3-year-panda-bond-among-foreign-issuers-5-billion-yuan
- https://gfmag.com/features/china-reforms-panda-bond-market/
Featured Images: pexels.com
