Global Companies Flock to China's Debt Markets as Yuan Interest Rates Remain Low

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China,Debt Markets,Yuan-Denominated Bonds

Global companies are taking advantage of low yuan interest rates by issuing record amounts of yuan-denominated bonds and borrowing heavily from Chinese banks. This surge in borrowing has propelled the yuan to become the second-biggest currency used in global trade finance, supporting Beijing's efforts to internationalize the yuan.

Global companies are making a beeline for China's debt markets, issuing record amounts of yuan-denominated bonds and borrowing heavily from mainland banks, capitalising on rock-bottom yuan interest rates as funding costs elsewhere jump. Companies and banks are raising record amounts of cash through yuan bonds issued in mainland China and in Hong Kong, known as panda and dim sum bonds, respectively.

The surge in their borrowing from Chinese banks has catapulted the yuan past the euro into becoming the second-biggest currency used in global trade finance, providing a fillip to Beijing's ambitions to internationalize the yuan. The global rush to borrow from China is counterintuitive, coming as international investors are shunning the world's second-biggest economy out of concerns about geopolitical tensions and weak growth, says Fiona Lim, senior FX strategist at Mayban

 

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