China to issue first US$-denominated bonds in 13 years

The Chinese government is set to issue some US$2bn in dollar-denominated sovereign bonds in Hong Kong, the first such Chinese dollar offering since 2004.

The sale is “set to shake up” Asia’s bond market, Bloomberg predicted on Wednesday, after China’s Ministry of Finance announced that in the coming days it would issue US$1bn in five-year notes and US$1bn in ten-year notes, listed in Hong Kong.

While China’s government doesn’t need to borrow offshore, reports Bloomberg, with a domestic debt market that’s now the world’s third-largest, its bonds will provide a new benchmark for pricing the country’s state-owned enterprises.

A successful deal will pull down borrowing costs, and may fuel further sales after what has already been record issuance so far this year, market analysts said.

Investors in China have shown great appetite for dollar securities, and Goldman Sachs predicts that within as little as three years, 80% of Asian debt outside of Japan will be Chinese.

“This new issue is going to set a credit benchmark for other Chinese issuers,” the South China Morning Post quoted Westpac Banking head of Asia macro strategy Frances Cheung as saying.

Hong Kong-based senior strategist for Asia at Manulife Asset Management Geoff Lewis said of China’s sovereign bonds sale, in an interview with Bloomberg Television: “It will certainly have scarcity value, and I imagine it will be snapped up pretty quickly.”

He added: “It’s a clear sign of China’s determination to move into the international financial markets” and play a role “commensurate with the size of its economy”.

Eugene Costello
Eugene Costello has been a journalist for some 20 years, and has written for a wide variety of UK and international newspapers and magazines.

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