China borrows almost as cheaply as US in return to dollar bond market

China has borrowed almost as cheaply as the US after returning to the global dollar bond market for the first time in three years. Investors placed nearly $40bn of orders to buy $2bn of bonds issued by China’s finance ministry on Thursday at yields only marginally above equivalent US Treasuries. The sale took place in Saudi Arabia — a break with a tradition of issuing bonds in Hong Kong — in a sign of Beijing’s push for closer financial links with the oil-rich kingdom.

Beijing’s older US dollar bonds have already traded below US Treasuries this year, partly due to demand from Chinese investors looking to park dollars they hold offshore. Chinese investors enjoy tax-free interest payments on the country’s government bonds. “There is a huge demand imbalance ,” said Ju Wang, head of FX and rates for greater China at BNP Paribas, who said historically much of the demand for Chinese sovereign dollar bonds came from domestic investors.

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