China Islamic bond push renews as global-focused funds quadruple

A Chinese company plans its first dollar sukuk issuance to tap a four-fold increase in Chinese funds that can invest in bonds overseas. A sukuk is a type of bond consistent with the Islamic faith.

Sichuan Development Financial Leasing Co plans to sell $300 million of Islamic bonds via the Singapore-based special purpose vehicle, Silk Routes Capital Pte, in December, according to Silk Routes Financials, which is the financial adviser on the sale. The deal is being done in the city-state because China doesn't have equal tax treatment for sukuks, said Bobby Tay, an adviser at the consultancy.

The planned offering follows China's inaugural ringgit sukuk by Country Garden Holdings Co last year. The support for Islamic finance complements President Xi Jinping's Belt and Road Initiative goal of reviving historical trade routes with the Middle East. Research firm Z-Ben Advisors estimated Chinese funds that invest in bonds overseas through the nation's Qualified Domestic Institutional Investors program more than quadrupled this year to 17.4 billion yuan ($2.6 billion) as of Sept 30.