Chinese businesses preparing for substantial bond issuances, aiming to fuel expansion with record-breaking offerings of Dim Sum bonds
In recent times, there has been a significant shift in the financing strategies of Chinese companies as they venture into international markets. This shift is largely due to the internationalisation of the yuan, a trend that Beijing has been promoting amid geopolitical tensions.
According to Gordon Tsui Luen-on, managing director and head of fixed income at Ping An China Asset Management (Hong Kong), expanding the yuan bond market is in China's national interest to support the overseas growth of Chinese companies. This sentiment is echoed by Hua Cheng, senior vice-president and director of Asia credit research at AllianceBernstein, who stated that Chinese companies can well issue offshore bonds in the offshore yuan space.
The issuance of dim sum bonds, yuan-denominated bonds issued in Hong Kong, is on track for a record year. Chinese corporate giants are rushing to Hong Kong to raise funds, attracted by the relatively cheap cost of offshore yuan funding compared to US dollar interest rates. This shift from US dollar bonds to offshore yuan bonds is a strategic move by Chinese companies seeking to finance their international expansion.
Analysts suggest that this trend is a response to US dollar interest rates that have remained high in the past few years. The lower cost of offshore yuan funding makes it an attractive option for Chinese companies, encouraging more of them to expand overseas and seek financing in this manner.
However, specific information about Chinese companies planning to issue offshore yuan bonds within the next five years to finance their international expansion is not yet available in the search results. What is certain, though, is that over the next five years, Chinese companies will issue more offshore bonds to fund their expansion overseas.
This shift towards offshore yuan funding is a testament to the growing confidence of Chinese companies in the international market and their increasing willingness to seek financing options outside of the US dollar space. As the yuan continues to gain international recognition, it is expected that Chinese companies will further increase their use of offshore yuan bonds for offshore financing.
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