The rapid growth of Panda bonds has significantly advanced the global integration of China's currency, the renminbi (RMB), boosting its international recognition and reinforcing investor confidence in China's investment and financing landscape.
Panda bonds, which refer to yuan-denominated debts issued by overseas entities to meet financing needs, play a crucial role in promoting the internationalization of the RMB.
Currently, the RMB ranks as the world's third-largest trade financing currency. In 2024, foreign financial institutions and enterprises issued nearly 200 billion yuan (about 27.43 billion U.S. dollars) worth of Panda bonds in China, marking a year-on-year growth of 32 percent. Additionally, offshore RMB bond issuance experienced a staggering 150 percent increase compared to the previous year.
Samuel Fischer, currently the Deutsche Bank Head of China Onshore Debt Capital Markets and vice president of the bank's Beijing branch, has observed the remarkable growth of Panda bonds in recent years.
Fischer first came to China as a student in 1999. After graduating, he recognized the immense potential of China's financial market and chose to build his career in Beijing.
The rapid expansion of Panda bonds has opened up numerous business opportunities for him, helping Deutsche Bank become the largest foreign bank in Panda bond underwriting by 2024.
"As you can see, the liquidity of Panda bonds is actually very good, and it is a product that investors are enthusiastically pursuing. The financing scale is comparable to that of the euro and the US dollar. The RMB exchange rate and interest rate are relatively stable, so it provides a relatively stable and reliable financing channel for global institutions," he said.
According to Fischer, RMB financing is a natural choice for multinational corporations operating in China, including overseas trading companies with established trade ties to the country. "Some multinational groups have been doing very well in China, and most of them have adopted RMB as the settlement currency for cross-border trade. Another scenario is that with the internationalization of RMB, many companies in developing countries import some equipment from China, and have already felt the convenience of RMB financing, and want to further expand the channels for RMB financing," he said.
Experts also highlighted that the process of RMB internationalization also requires the support of multilateral development banks and foreign institutions.
The Asian Infrastructure Investment Bank (AIIB), the first 3A-rated international credit issuer to issue Panda bonds in China under the updated 2018 regulations, has over 300 investment projects globally and has issued a total of 14.5 billion yuan in Panda bonds.
"We had issued [bonds] in three and five years mainly [in China]. The government of China, they have issued also longer dated bonds, 30 years and even longer. And this is a very good development for the market to have a yield curve across maturities. This is also something that international investors want to see, because the market becomes very, very comparable to other developed markets," said Domenico Nardelli, a treasurer of the AIIB.
Meanwhile, financial analysts have noted a significant rise in the international acceptance of the RMB in recent years, along with substantial improvements in its role as a currency for global investment and financing. "In the future, RMB assets may also become mainstream. Not only do the Chinese hold a relatively high proportion of RMB assets, but other countries are also increasing their holdings," said Deng Zhijia, a senior investment strategist at DBS Bank.
Strong growth of Panda bonds boosts RMB internationalization
