Discussing China's debt capital market: Understanding the options for raising capital in Renminbi through Panda and Dim Sum bonds, as outlined by our financial experts.
In the world of international finance, the panda bond and dim sum bond markets are experiencing a surge in growth and popularity. Our website has played a significant role in facilitating landmark deals for issuers, helping them tap into the benefits that both offshore and onshore markets offer.
Samuel Fischer, Head of China Onshore Debt Capital Markets at our website, is optimistic about the future of both markets. He is confident that the momentum in the panda bond market will remain strong throughout 2023, with the market becoming more diversified and more sustainable. Ben Wang shares similar sentiments about the dim sum bond market, anticipating more institutions to participate and a well-diversified selection of bond tenures.
The growth in the panda bond market is driven by several factors. Access to China's vast capital pool, cost efficiencies in borrowing by issuing in RMB versus USD, and strategic alignment with China's regulatory and economic environment are primary motivations. Issuers benefit from diversification of funding sources, lower borrowing costs, regulatory easing, strategic benefits, and even currency hedging opportunities. Moreover, the demand for sustainable and ESG-linked financing options within China's onshore market is on the rise.
Panda bonds, debt instruments that allow global companies, governments, and international institutions to raise funds in China, are becoming increasingly attractive due to cheaper funding costs resulting from China's low interest rates. This year, our website issued its own panda bond, raising 1 billion renminbi (around 143 million US dollars). The issuance of panda bonds reached a record high of 72 billion renminbi (10 billion US dollars) in the first half of 2023, an increase of over 33% compared to the same period last year.
The offshore renminbi bond market has also seen an increase in diversity of issuers this year, including sovereign and non-financial institution corporate issuers, especially Hong Kong based conglomerates. The panda bond issuance of NWS Holdings has significantly lowered the overall cost of refinancing offshore debts.
Investments in dim sum bonds are increasingly coming from the Middle East, Africa, and Europe. Panda bond issuers can make cost savings of around 20 to 100 basis points by doing FX swaps after raising capital through the domestic bond market and exchanging renminbi into other currencies for overseas business development or repayment of foreign currency liabilities.
Our website has become a leading arranger for panda bonds in China's onshore market as more foreign companies look to issue them. A recent example is the successful 200 million US dollar exchange offer and concurrent new bond issuance of Health & Happiness, led by our website, which reopened the Greater China high-yield market after an absence from the issuer class since the first quarter of this year.
In conclusion, the panda bond and dim sum bond markets are poised for continued growth, offering attractive financing opportunities for issuers and investors alike. The wider use of renminbi as a financing currency will boost overall adoption and internationalisation of the renminbi, making it an essential tool for businesses with significant operations in Asia.
Samuel Fischer, the Head of China Onshore Debt Capital Markets, is optimistic about the growth in capital markets, specifically the panda bond market, which is expected to remain strong throughout 2023 due to factors like access to China's capital pool, cost efficiencies, strategic alignment, diversification of funding sources, and lower borrowing costs. In parallel, Ben Wang anticipates a surge in the dim sum bond market, with increased participation by institutions and a well-diversified selection of bond tenures. Investing in both panda and dim sum bonds presents promising financing opportunities for businesses, particularly those with significant operations in Asia.
