PBOC set to further boost panda bond issuances
China will further improve policy arrangements for panda bonds to facilitate more issuance and trading by overseas institutions, including sovereign states, according to the People's Bank of China, the country's central bank.
Panda bonds are renminbi- denominated bonds issued by overseas institutions in China's onshore market.
Record sovereign panda bond issuances in recent times have underscored growing global demand for renminbi financing. Several sovereign issuers, including the governments of Indonesia, Kazakhstan and Pakistan, as well as Kazakhstan's sovereign wealth fund, made their debut in China's panda bond market this year, raising 19.15 billion yuan ($2.83 billion) in total.
The fundraising marked the largest annual sovereign panda bond issuance on record, far surpassing the previous full-year high of 7 billion yuan set in 2025.
In a written interview with China Daily, the Financial Market Department of the PBOC attributed the surge in issuances to China's well-functioning, open and inclusive bond market, as well as the growing financing-cost advantages of panda bonds and continuous policy improvements.
"The panda bond market has attracted the attention and participation of more international issuers, including sovereign states, playing a significant role in promoting the internationalization of the RMB and facilitating international exchanges and diplomatic cooperation," the PBOC said.
For sovereign states raising funds across multiple markets, panda bonds offer a new option that helps broaden funding channels, diversify financing risks and reduce borrowing costs, it said.
Looking ahead, the central bank will "continuously optimize and improve the policy environment for panda bonds, facilitating the participation of more overseas institutions, including sovereign states, in the issuance and trading of panda bonds in China, thereby meeting the RMB financing needs of foreign institutions".
Since the panda bond market was launched in 2005, as many as 13 sovereign states and institutions have issued panda bonds together worth 56.61 billion yuan, with Indonesia joining the group most recently by issuing 7 billion yuan in sovereign panda bonds in July.
Meanwhile, Brazil is aiming to issue panda bonds within the next few months to become the first Latin American sovereign issuer.
The PBOC said that as China's economic and trade ties with other countries continue to deepen, more sovereign nations have financing needs in RMB for cross-border trade settlement, project investment and supply chain operations.
"By issuing panda bonds, sovereign nations can broaden their multicurrency funding channels, facilitate the use of funds across various RMB-denominated scenarios and reduce currency conversion costs and exchange rate risks in RMB use scenarios," it said.
Sovereign borrowers can use the proceeds for bilateral joint projects and industrial cooperation, helping to upgrade bilateral economic and trade cooperation, expand the scope for financial cooperation and promote mutual benefit and common development, it added.
Samuel Fischer, head of China onshore debt capital markets at Deutsche Bank, described the growing sovereign participation as "a crucial step" in strengthening the RMB's function as a financing currency.
"When sovereign nations choose to raise capital in RMB, it signals a high level of trust in the currency and the Chinese financial market," Fischer said, citing the relative stability of the RMB bond market compared with the intensified volatility in primary markets such as the dollar, euro and yen.
Coupon rates on sovereign panda bonds issued since the beginning of the year ranged from 1.89 percent to 2.5 percent, according to market tracker Wind Info, which reflects the advantage of relatively low funding costs.
Opening-up gains
The PBOC said that sovereign panda bond issuances are expected to help further align China's bond market with international practices and encourage more institutions to tap China's bond market as issuers and investors, further deepening the high-standard opening-up of China's bond market.
In recent years, the central bank — together with other authorities — has continuously strengthened panda bond market development, aligning rules more closely with international practices and enhancing issuance efficiency and disclosure transparency.
It said that issuers may choose issuance size and timing within their registered quotas and a two-year validity period, helping them to seize issuance windows in a timely and flexible manner.
In terms of disclosure, China supports sovereign countries in disclosing economic data reports when issuing panda bonds. Issuers may disclose financial reports prepared under equivalent accounting standards directly in the domestic market, or provide required disclosure documents through targeted disclosure based on consultation with investors.
Panda bond proceeds may be used onshore or remitted overseas, and overseas issuers are encouraged to use the proceeds for cross-border payments in RMB, the PBOC said.
It noted that panda bond issuances are not subject to mandatory rating requirements, as investors in China's interbank bond market are qualified institutional investors with pricing capabilities, financial strength and risk-bearing capacity.
From 2005 to June 2026, the cumulative worth of panda bonds issued had exceeded 1.3 trillion yuan, while issuance in the first half of this year topped 160 billion yuan, up 69 percent from a year earlier.
Speaking at the 2026 Lujiazui Forum in Shanghai in June, PBOC Governor Pan Gongsheng said that China will steadily develop the panda bond market as part of its financial opening-up efforts.
Fischer, from Deutsche Bank, said the panda bond market "is now shifting from a tactical option to a strategic component for many of our major multinational clients".
"This growing maturity, coupled with a track record of strong investor demand and favorable financing costs, suggests that the panda bond market will continue to attract a broader and more diverse range of issuers, including sovereigns," he added.
