Panda Bonds – A new landscape in China’s bond market: An issuer’s guide for funding diversification provides foreign issuers with a comprehensive overview of China’s onshore debt market and the potential benefits of issuing Panda Bonds.

China’s onshore bond market has grown substantially over the past decade. From just under USD 2 trillion of bonds outstanding in 2007, it has gone on to become the third largest domestic bond market in the world, as at 30 June 2018 with around USD 11.9 trillion of bonds outstanding.

The onshore bond market has also grown in diversity as seen by a significant jump in Panda Bond issuance over the past three years. The positivity surrounding Panda Bonds is partly driven by regulators, who are keen to attract more foreign issuers to tap into the onshore bond market.

In addition, landmark initiatives such as the ‘Belt and Road’ Initiative and the Greater Bay Area are prompting a new wave of financing in order to satisfy the huge funding needs of infrastructure projects. Panda Bonds can be an ideal instrument for foreign corporates to diversify their funding channels and gain access to one of the largest fixed income markets globally.

However, given that Panda Bonds are still in an early stage of development, there are aspects in the application, documentation and issuance process that can be further refined. This includes differences in domestic and international accounting, auditing and credit rating rules – hurdles that are expected to be resolved as the market matures and aligns itself more closely with international standards.