Currently, overseas sovereign states, multinational corporations, and financial institutions are accelerating the use of the Chinese yuan for cross-border financing, with yuan-denominated bonds (Dim Sum Bonds), panda bonds, and offshore RMB loans all experiencing a significant increase in volume.

According to Bloomberg's compiled data, as of now, the total issuance of panda bonds (RMB bonds issued by overseas issuers within China) and Dim Sum Bonds (RMB bonds issued by overseas issuers outside China) this year has reached 218 billion yuan, setting a new record for the same period. The Indonesian government and Morgan Stanley have also participated in this trend.

At the same time, the combined amount of RMB bond financing and offshore RMB loans related to 2025 is expected to reach 1.15 trillion yuan, a threefold increase from just five years ago, again breaking records.

Since the end of last year, expectations among Wall Street analysts for further appreciation of the yuan have been intensifying. Meanwhile, policy signals have become increasingly frequent. According to a report by Xinhua News on February 26, the People's Bank of China issued a notice supporting and regulating cross-border RMB interbank financing business, providing liquidity to the offshore market.

Panda Bonds "From Niche to Routine Tool," Foreign Investors' Issuance More Frequent

According to reports, more and more foreign institutions are choosing to issue RMB bonds within China, driving the panda bond market from its past dominance by multilateral institutions to a more diversified range of industries and issuers.

Data shows that the issuance of panda bonds this year has reached about 51.4 billion yuan, the highest for the same period. The report also notes that although Chinese enterprises' overseas subsidiaries remain the main issuers, the number of foreign borrowers issuing bonds has increased from 6 in 2015 to 36 in the previous year; Morgan Stanley and Barclays both issued again in 2026.

Liu Wei, vice president of the Investment Banking Center at China Bank, said: “Offshore issuers are increasingly incorporating panda bonds into their long-term debt management frameworks, treating them as routine financing tools. Borrower behavior has undergone a fundamental change.”

Low Interest Rates + Trade Settlement: Two Driving Forces Behind RMB Financing Demand

The report attributes this recent surge to multiple factors converging: relatively lower interest rates in China, a阶段性 recovery in the RMB exchange rate, and some investors' desire to diversify their asset allocation away from the US dollar.

The cost comparison is more evident in sovereign financing. When Indonesia issued a dual-currency sovereign bond last month, the yield on its 10-year offshore RMB bond was about 100 basis points lower than that of its 8-year euro bond. In this context, according to market statistics (excluding issues by the Hong Kong authorities and the central government of China), the issuance of Dim Sum Bonds since 2026 has reached about 103 billion yuan, nearly double that of the same period last year.

At the same time, the increased use of the RMB in trade settlements has raised the actual demand for holding RMB. Data shows that the share of RMB in cross-border goods trade settlements in China rose to 34.5% last year, up from a low of around 10% in 2017.

Aidan Yao, an investment strategy specialist at CLSA Asset Management, said: “The internationalization of the RMB is gaining real momentum, especially in trade settlement and financing.” He added that more RMB settlements would lead to "spillover demand into the offshore bond market and form a positive cycle."

The use of the RMB in carry trades is also increasing. Aidan Yao said, “The Chinese RMB is becoming an alternative option for global carry trade financing, apart from the Japanese yen.” Samuel Tse, senior economist at DBS Bank, said, “De-dollarization is a continuous theme, and despite tensions in the Middle East, the internationalization of the RMB will continue,” and mentioned that there were inflows into Chinese bonds and stocks last year.

Policy Front: PBOC Issues Notice to Regulate Cross-Border Interbank Financing

Regarding cross-border RMB liquidity arrangements, Xinhua News reported on February 26 that to enhance the level of capital account openness, develop the RMB offshore market, and improve macro-prudential management of cross-border capital flows, the People's Bank of China issued a notice on February 26 to support and regulate cross-border RMB interbank financing between domestic banking institutions and overseas entities.

RMB cross-border interbank financing is an important channel for domestic banks to provide RMB liquidity to the offshore market and promote the cross-border use of the RMB.

According to the introduction, the notice issued by the People's Bank of China titled "Notice on Matters Concerning RMB Cross-Border Interbank Financing Business of Banking Financial Institutions" covers various types of RMB cross-border interbank financing businesses. It links the net outflow balance of RMB cross-border interbank financing by banking institutions to their capital levels and financial strength, promoting reasonable business development. The notice sets macro-prudential management parameters and adjusts them countercyclically based on market conditions. The parameter settings fully consider market demand and the operating conditions of banking institutions, which is conducive to providing stable liquidity to the RMB offshore market and promoting the cross-border use of the RMB.

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Original: toutiao.com/article/7613942096596173350/

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