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What Is China’s Foreign Bond Market?
29 мая 2025
Russian issuers are showing growing interest in placing bonds in China, according to experts from Eurasia Development in a study reviewed by Vedomosti. There are two main reasons: limited access to global capital markets combined with high domestic interest rates, and the growing role of the yuan in international settlements.
Under these conditions, issuing debt securities in mainland China is one of the few effective and economically attractive ways to raise yuan-denominated financing, Eurasia Development notes. A placement in China can also help strengthen relationships with local banks and investment funds.
Under these conditions, issuing debt securities in mainland China is one of the few effective and economically attractive ways to raise yuan-denominated financing, Eurasia Development notes. A placement in China can also help strengthen relationships with local banks and investment funds.
VTB became the first Russian issuer to place bonds denominated in Chinese currency in 2010, raising RMB 1 billion in Hong Kong. Rusal remains the only Russian borrower to have entered mainland China’s bond market. In 2017, the aluminum producer placed seven-year bonds worth RMB 1.5 billion on the Shanghai Stock Exchange. A year earlier, Rusal had received an AA+ credit rating from local agency China Chengxin Securities Rating.
A number of Russian companies received ratings from Chinese agencies in 2024–2025. In April, Dagong Global Credit Rating assigned ratings to Rusal — the highest AAA rating on the domestic scale and a moderate iBBB+ on the international scale — and to Atomenergoprom, a subsidiary of Rosatom, which received AAA on the national scale.
Dagong also rated Ingosstrakh (iBBB+ internationally) and Ingosstrakh Bank (A+ domestically and iBB internationally). In March 2025, China Lianhe Credit Rating assigned Russian Agricultural Bank an AA rating on the national scale. Russian Railways received ratings from CCXI last year — AAA domestically and BBB+g internationally.
Severstal is in active discussions with several Chinese rating agencies and has been exploring the possibility of issuing yuan-denominated bonds through China’s financial infrastructure for a second consecutive year, Vedomosti reported in April.
A number of Russian companies received ratings from Chinese agencies in 2024–2025. In April, Dagong Global Credit Rating assigned ratings to Rusal — the highest AAA rating on the domestic scale and a moderate iBBB+ on the international scale — and to Atomenergoprom, a subsidiary of Rosatom, which received AAA on the national scale.
Dagong also rated Ingosstrakh (iBBB+ internationally) and Ingosstrakh Bank (A+ domestically and iBB internationally). In March 2025, China Lianhe Credit Rating assigned Russian Agricultural Bank an AA rating on the national scale. Russian Railways received ratings from CCXI last year — AAA domestically and BBB+g internationally.
Severstal is in active discussions with several Chinese rating agencies and has been exploring the possibility of issuing yuan-denominated bonds through China’s financial infrastructure for a second consecutive year, Vedomosti reported in April.
Pandas, Dim Sums and Where They Live
China’s bond market is one of the largest in the world, but foreign issuers played only a minor role in it for a long time, according to the Eurasia Development study. The situation has begun to change in recent years amid China’s economic recovery, the internationalization of the yuan, improvements in regulation, and the interest-rate differential with the United States — 1.6% versus 4.5% for 10-year sovereign bonds, respectively.
China’s debt market is divided into the exchange-traded market and the interbank market. The former provides easier access, while the latter offers greater liquidity but involves more complex procedures, the experts explain. Transferring proceeds abroad requires approval from the foreign-exchange authorities.
Foreign issuers can raise financing in China through three main instruments. Panda bonds are yuan-denominated bonds issued in mainland China’s domestic market. Dim sum bonds are yuan-denominated bonds issued in Hong Kong. FTZ bonds — free trade zone bonds — are issued in Chinese free trade zones and may be denominated in yuan or other currencies.
The panda bond market, which was originally created for foreign issuers, is 62% composed of red-chip companies, down 17.6 percentage points in 2024. These are companies with Chinese capital incorporated outside mainland China, including in Hong Kong, the Cayman Islands and Bermuda.
Eurasia Development attributes their high share to the lower cost of issuing panda bonds compared with local bonds. Chinese regulators are also interested in their participation as a way to increase market liquidity. However, the situation is gradually changing, and the market is becoming increasingly attractive to foreign issuers, the study says.
China’s bond market is one of the largest in the world, but foreign issuers played only a minor role in it for a long time, according to the Eurasia Development study. The situation has begun to change in recent years amid China’s economic recovery, the internationalization of the yuan, improvements in regulation, and the interest-rate differential with the United States — 1.6% versus 4.5% for 10-year sovereign bonds, respectively.
China’s debt market is divided into the exchange-traded market and the interbank market. The former provides easier access, while the latter offers greater liquidity but involves more complex procedures, the experts explain. Transferring proceeds abroad requires approval from the foreign-exchange authorities.
Foreign issuers can raise financing in China through three main instruments. Panda bonds are yuan-denominated bonds issued in mainland China’s domestic market. Dim sum bonds are yuan-denominated bonds issued in Hong Kong. FTZ bonds — free trade zone bonds — are issued in Chinese free trade zones and may be denominated in yuan or other currencies.
The panda bond market, which was originally created for foreign issuers, is 62% composed of red-chip companies, down 17.6 percentage points in 2024. These are companies with Chinese capital incorporated outside mainland China, including in Hong Kong, the Cayman Islands and Bermuda.
Eurasia Development attributes their high share to the lower cost of issuing panda bonds compared with local bonds. Chinese regulators are also interested in their participation as a way to increase market liquidity. However, the situation is gradually changing, and the market is becoming increasingly attractive to foreign issuers, the study says.
The largest foreign issuers of panda bonds include Mercedes-Benz, which has issued a cumulative RMB 84 billion, China Power International (Hong Kong) with RMB 80 billion, and the New Development Bank of BRICS with RMB 68.5 billion.
Other issuers that have placed bonds in mainland China include BMW, Volkswagen, Deutsche Bank, National Bank of Canada and others. Most securities are issued on the interbank market, with the remainder placed on the Shenzhen and Shanghai stock exchanges.
The main investors in panda bonds are Chinese banks — including ICBC, China Development Bank and Bank of Communications — as well as insurance companies such as China Re, China Life and ICBC-AXA Life Insurance.
In 2024, 44 issuers placed more than 100 panda bond issues with a record total value of RMB 195 billion, up 26% year-on-year, according to Eurasia Development. Issuance in the first four months of 2025 amounted to RMB 62.2 billion.
Four new foreign issuers entered the panda bond market in 2024:
Among corporate issuers, companies from mainland China and Hong Kong dominate, with a combined share of 85.7%, up 29.3 percentage points in 2024. Mainland companies often establish SPVs in Hong Kong to invest overseas or raise funds in the offshore market, according to the study.
Foreign companies that have issued dim sum bonds include US fast-food chain McDonald’s, US equipment manufacturer Caterpillar, and UK consumer goods producer Unilever, among others.
Dim sum bonds are primarily used to finance investment projects or replenish working capital, which is why most issues have maturities of one to three years, Eurasia Development notes.
The first FTZ bond issue took place in 2019. The instrument was originally designed to attract international investors, but from 2022 local state-owned enterprises began using it actively as controls over hidden debt tightened and access to US dollar financing declined.
Flexible rules and low issuance costs made FTZ bonds a convenient alternative, according to the experts. However, following a surge in activity, the local regulator issued an informal recommendation to investor banks in May 2023 to suspend purchases of bonds issued by entities that were not residents of the free trade zones.
Before the recommendation, there had been 120 FTZ bond issues worth RMB 81.8 billion. Since then, the only placement was by Singapore’s CapitaLand China Trust, part of the Temasek Holdings investment group, in October 2023.
The market is now awaiting a relaunch under a new and more predictable regulatory framework, Eurasia Development concludes.
Other issuers that have placed bonds in mainland China include BMW, Volkswagen, Deutsche Bank, National Bank of Canada and others. Most securities are issued on the interbank market, with the remainder placed on the Shenzhen and Shanghai stock exchanges.
The main investors in panda bonds are Chinese banks — including ICBC, China Development Bank and Bank of Communications — as well as insurance companies such as China Re, China Life and ICBC-AXA Life Insurance.
In 2024, 44 issuers placed more than 100 panda bond issues with a record total value of RMB 195 billion, up 26% year-on-year, according to Eurasia Development. Issuance in the first four months of 2025 amounted to RMB 62.2 billion.
Four new foreign issuers entered the panda bond market in 2024:
- German chemical group BASF raised RMB 2 billion for two years at 2%
- German pharmaceutical company Bayer raised RMB 2 billion for three years at 2%
- Singapore hotel group Shangri-La raised RMB 11 billion for four years at 2%
- Brazilian pulp and paper producer Suzano raised RMB 1 billion for three years at 3%
Among corporate issuers, companies from mainland China and Hong Kong dominate, with a combined share of 85.7%, up 29.3 percentage points in 2024. Mainland companies often establish SPVs in Hong Kong to invest overseas or raise funds in the offshore market, according to the study.
Foreign companies that have issued dim sum bonds include US fast-food chain McDonald’s, US equipment manufacturer Caterpillar, and UK consumer goods producer Unilever, among others.
Dim sum bonds are primarily used to finance investment projects or replenish working capital, which is why most issues have maturities of one to three years, Eurasia Development notes.
The first FTZ bond issue took place in 2019. The instrument was originally designed to attract international investors, but from 2022 local state-owned enterprises began using it actively as controls over hidden debt tightened and access to US dollar financing declined.
Flexible rules and low issuance costs made FTZ bonds a convenient alternative, according to the experts. However, following a surge in activity, the local regulator issued an informal recommendation to investor banks in May 2023 to suspend purchases of bonds issued by entities that were not residents of the free trade zones.
Before the recommendation, there had been 120 FTZ bond issues worth RMB 81.8 billion. Since then, the only placement was by Singapore’s CapitaLand China Trust, part of the Temasek Holdings investment group, in October 2023.
The market is now awaiting a relaunch under a new and more predictable regulatory framework, Eurasia Development concludes.
A Difficult Choice
Russian companies with business operations in China are the primary candidates for bond issuance in the country, says Anastasia Vlasova, macroeconomic analyst at Ingosstrakh Investments.
Issuers that do not conduct business in China would face difficulties transferring yuan proceeds out of the country because of local foreign-exchange restrictions, she says. Vlasova is aware that a number of Russian companies are considering issuing bonds in the Chinese market, but believes that actual placements are unlikely in the near term under the current sanctions environment.
Chinese authorities are clearly interested in developing relations with Russia, but are also concerned about creating risks for the country’s financial system because China’s trade turnover with Western countries is larger, says Artem Mayorov, Head of Asset Management at Ingosstrakh Investments.
Chinese banks and other local institutional investors are also extremely cautious even in their communications with Russian counterparties because of concerns over secondary sanctions, he notes. As a result, retail investors would probably become the main buyers of securities issued by Russian companies. However, to generate retail demand, an issuer would need to be well known among Chinese investors, Mayorov warns.
In addition, not every Russian company would be able to comply with the relatively complex procedures required for issuing securities in China: issuers must obtain a rating from a local agency, prepare financial statements in accordance with local standards, and meet other requirements.
Finam agrees that issuing bonds in China is currently of interest to Russian businesses, but the range of companies capable of doing so is largely limited to suppliers of commodities or services to the Chinese market, says Alexey Kurasov, Head of Corporate Finance.
Against the backdrop of monetary easing by the People’s Bank of China in recent years — in May, the benchmark lending rate was reduced by 0.1 percentage point to 3% per annum — domestic issuers are already highly leveraged, so investors are looking for high-quality borrowers outside China, he argues.
However, the absence of a bridge between the central securities depositories of Russia and China makes direct settlement of securities transactions impossible. Investors would therefore also need to obtain special authorization to transfer funds abroad, Kurasov concludes.
Read the original Vedomosti article:
https://www.vedomosti.ru/investments/articles/2025/05/27/1112880-chto-predstavlyaet-soboi-rinok-inostrannih-obligatsii-kitaya
ED Group’s research on China’s bond market:
https://chinahi.tech/obligazii_v_kitae
Russian companies with business operations in China are the primary candidates for bond issuance in the country, says Anastasia Vlasova, macroeconomic analyst at Ingosstrakh Investments.
Issuers that do not conduct business in China would face difficulties transferring yuan proceeds out of the country because of local foreign-exchange restrictions, she says. Vlasova is aware that a number of Russian companies are considering issuing bonds in the Chinese market, but believes that actual placements are unlikely in the near term under the current sanctions environment.
Chinese authorities are clearly interested in developing relations with Russia, but are also concerned about creating risks for the country’s financial system because China’s trade turnover with Western countries is larger, says Artem Mayorov, Head of Asset Management at Ingosstrakh Investments.
Chinese banks and other local institutional investors are also extremely cautious even in their communications with Russian counterparties because of concerns over secondary sanctions, he notes. As a result, retail investors would probably become the main buyers of securities issued by Russian companies. However, to generate retail demand, an issuer would need to be well known among Chinese investors, Mayorov warns.
In addition, not every Russian company would be able to comply with the relatively complex procedures required for issuing securities in China: issuers must obtain a rating from a local agency, prepare financial statements in accordance with local standards, and meet other requirements.
Finam agrees that issuing bonds in China is currently of interest to Russian businesses, but the range of companies capable of doing so is largely limited to suppliers of commodities or services to the Chinese market, says Alexey Kurasov, Head of Corporate Finance.
Against the backdrop of monetary easing by the People’s Bank of China in recent years — in May, the benchmark lending rate was reduced by 0.1 percentage point to 3% per annum — domestic issuers are already highly leveraged, so investors are looking for high-quality borrowers outside China, he argues.
However, the absence of a bridge between the central securities depositories of Russia and China makes direct settlement of securities transactions impossible. Investors would therefore also need to obtain special authorization to transfer funds abroad, Kurasov concludes.
Read the original Vedomosti article:
https://www.vedomosti.ru/investments/articles/2025/05/27/1112880-chto-predstavlyaet-soboi-rinok-inostrannih-obligatsii-kitaya
ED Group’s research on China’s bond market:
https://chinahi.tech/obligazii_v_kitae
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