The Asian Development Bank (ADB) and the International Finance Cooperation (IFC) Tuesday marked the debut of yuan-denominated Panda Bonds, the first local currency bonds released by overseas multinational development organizations.
Addressing a ceremony marking the debut, ADB President Haruhiko Kuroda, expressed his deep appreciation for the leadership and commitment of the Chinese government to opening the domestic bond market to foreign issuers, and the strong support received from the Chinese government for the ADB's Panda bond issue.
Paul Wolfowitz, president of the World Bank and IFC, also described the successful debut of the bonds as a landmarking event on the Chinese bond markets.
ADB issued 1 billion yuan worth of the bonds while IFC offered 1.13 billion yuan worth of the bonds on the Chinese markets earlier this month. Wolfowitz said the proceeds from the issuance will be used for financing private business in China.
Haruhiko said the timing of ADB and IFC Panda bond issues could not be better. Over the past 25 years, China's economic performance has been spectacular.
China is today the world's seventh-largest economy and the fourth largest in terms of trade and is now a member of the World Trade Organization. China's dynamic growth makes it a powerful force for the development of the region as a whole and to Asia's economic integration.
To sustain this economic performance, it is vital for China to press ahead with the development of its bond market. "I am pleased to note that PRC's bond market has been growing rapidly in recent years - currently about 600 billion US dollars in bonds outstanding or more than five times the amount in 1997."
At the same time, major efforts are being made to develop liquid benchmark yield curve, expand investor base, introduce new instruments, and improve clearing and settlement infrastructure.
A well functioning bond market will enable China to reduce the risk of over dependency on bank lending, help mobilize high domestic savings for productive investments, facilitate monetary policy and macroeconomic control, and promote the longer-term objective of economic and financial integration in the region, said the president.
ADB and IFC Panda bond issues can contribute to the growth of China's bond market in many respects, he said.
"Such transactions will promote more diversity in bond issuers - which is a key element for product innovation. The Panda bonds also represent a step towards adopting global best practices particularly in disclosure, documentation, and deal management."
The success of ADB and IFC issues demonstrates the readiness of China's bond market for participation by foreign issuers and investors, he said.
The Panda issue represents ADB's fourth market-opening transactions in the region since February 2004. The other three issues were in India,Malaysia, and Thailand.
With these landmark issues, ADB continues its role as a pioneer in regional bond markets - providing local and international investors with high quality debt securities, supported by best practice issue standards and role model disclosure and documentation.
The Panda bond issue also represents a key milestone in ADB's operations in China. The issue will enable ADB to start its local currency lending in China and help reduce currency mismatches for borrowers that have no foreign exchange earnings.