Chinese companies will increasingly shift towards offshore yuan bonds and away from US dollar bonds for their offshore financing, according to panellists at S&P Global Ratings’ China Credit Spotlight forum on Wednesday.
Over the next five years, Chinese companies will issue more offshore bonds to fund their expansion overseas, but “it doesn’t necessarily have to be in the US dollar space, it can well be in the [offshore yuan] space,” said Hua Cheng, senior vice-president and director of Asia credit research at AllianceBernstein, at the event in Hong Kong.
US dollar interest rates have remained high in the past few years, making borrowing more expensive, while offshore yuan funding remained relatively cheap, according to analysts. Amid geopolitical tensions, Beijing has been promoting the internationalisation of the yuan. At the same time, more Chinese companies are expanding overseas and seeking financing.
Expanding the yuan bond market was in China’s national interest, especially to support the overseas growth of Chinese companies, said Gordon Tsui Luen-on, managing director and head of fixed income at Ping An China Asset Management (Hong Kong).
“In the international market, this helps them access funding through dim sum and other [offshore yuan] bonds,” Tsui said.
Issuance of dim sum bonds – yuan-denominated bonds issued in Hong Kong – is on track for a record year as Chinese corporate giants rush to the city to raise funds.
