China's panda bond market thrives amid opening-up

BEIJING, June 16 (Xinhua) -- As China has ratcheted up efforts to open up its financial sector, its panda bonds are gaining currency among international borrowers wanting to tap into the country's bond market.

German carmaker BMW last week launched 3.5 billion yuan (about 546.2 million U.S. dollars) of panda bonds in the China Interbank Bond Market. It became the first European company to issue bonds via public offerings in China, according to the National Association of Financial Market Institutional Investors (NAFMII).

Issued as a medium-term note and short-term financing bond, the two BMW panda bonds were oversubscribed by 2.99 times and 3.35 times, respectively, said the NAFMII.

The public offering is a highlight of BMW's debt issuance this time, industry insiders said, as this issuance mode features higher information disclosure requirements for issuers and larger potential buyer pools.

It is not the first that BMW has dabbled in China's panda bond market. As early as 2019, the auto giant rolled out its first batch of panda bonds (or yuan-denominated debts) sold by overseas issuers. Over the past two years, it has launched a total of 15.5 billion yuan of these bonds.

BMW's growing interest in panda bonds mirrored a blossoming bond market in the world's second-largest economy. Since 2015, China's panda bond development has been on a fast track, thanks to the Chinese yuan's inclusion into the "Special Drawing Rights" basket and continued government support for financial opening-up.

In its latest efforts to foster an enabling financing environment for international companies, the NAFMII last year optimized the registration, issuance, and management of panda bonds, aligned its information disclosure requirements with international practices and unveiled various self-disciplinary rules to tighten regulations.

With these supportive measures, international enterprises could better navigate China's panda pond market as they can serve as institutional safeguards and an action guide, analysts said.

Such moves have, in reality, produced encouraging effects. In March, the Asian Development Bank raised 2 billion yuan from its first panda bond issuance in more than a decade, followed by the BRICS New Development Bank's issuance of 5-billion-yuan bonds.

Data speaks for itself. By the end of May 2021, a total of 60 overseas institutions issued about 343.5 billion yuan of panda bonds in China's Interbank Bond Market, the NAFMII said.

The rapid growth of the panda bond market is evidence of its attraction for the global market and represents a significant achievement of the country's two-way financial opening-up, said Hu Kun, a manager with Bank of China.

Market watchers said overseas institutions' moves to issue panda bonds in China speaks to their confidence in the Chinese economy and market.

Panda bonds will likely hold even greater appeal for overseas borrowers in the future. They are buoyed by a narrowing interest rate gap with the United States, better financing advantages in China, and the two-way fluctuations of the yuan, a Golden Credit Rating report said.