“Panda bonds are popular, and Wall Street and multinational companies are flocking to the Chinese bond market.” Recent news shows that because China’s interest rates are at low levels and borrowing costs are much lower than in the U.S. dollar market, more and more foreign borrowers are issuing bonds in China to raise RMB funds.
Analysts pointed out that the panda bond boom will expand the scope of RMB use around the world and promote the internationalization of RMB.
Panda bonds refer to RMB-denominated bonds issued by overseas institutions in China.
Panda bond issuance has remained strong in recent years.
Moody’s statistics show that the issuance volume in 2024 hit a new high of 197.8 billion yuan, and the issuance volume in 2025 reached 183.1 billion yuan.
As of the second week of June, issuance volume in 2026 has reached 137.1 billion yuan, a year-on-year increase of 80.4%.
The pace of Panda bond issuance has accelerated significantly since the beginning of this year, with sovereign borrowers such as Kazakhstan and Pakistan, global financial institutions such as Morgan Stanley and Deutsche Bank, and multinational companies such as Volkswagen and Henkel joining.
In late May, Deutsche Bank announced that it had successfully raised 3.5 billion yuan through an oversubscribed issuance of 3-year and 5-year panda bonds.
According to data from Far East Credit Rating Co., Ltd., in May this year, the total amount of panda bond issuance was 26.64 billion yuan, setting a record high for the month.
Why are panda bonds so attractive that foreign governments, Wall Street banks and multinational companies flock to the Chinese bond market?
Mainly related to lower borrowing costs in China.
According to reports, the Federal Reserve interest rates remain high and borrowing costs in the U.S. dollar market remain high, but China’s loose monetary policy has brought domestic interest rates close to lows.
Analysts estimate that many foreign issuers can raise yuan funds at coupon rates below 3%, making it far cheaper than financing in U.S. dollars of the same size.
Moody’s told relevant media: “We believe that the key driver is the interest rate gap, and financing in RMB is much cheaper than US dollars.” The agency pointed out that the borrowing interest rate for Panda bonds issued by foreign banks is approximately 1.7% to 2.2%, and the interest rate in the US dollar market reaches 4.5% to 5.5%, which means that Panda bonds can save the issuer 2 to 3 percentage points in interest expenses.
Analysts believe that this cost advantage transforms the yuan into a financing currency.
Moody’s estimates that financial institutions will still be the main force in panda bond issuance, followed by sovereign and supranational borrowers. Multinational companies with large operations in China are also increasingly using this market for financing.
Wang Dan, China Director of Eurasia Group, said: “Wall Street banks are expanding RMB borrowings to support the growing demand for the use of RMB in international trade settlements. Banks need to continue to have larger RMB debt and RMB assets to continue to serve as key relationship banks and market makers for China-related customers.”
But low interest rates are not the only reason for the surge in panda bond issuance.
Alicia Garcia Herrero, chief economist for the Asia-Pacific region at investment management company Natixis, said China has shown an increasing willingness to give issuers greater flexibility in the use of funds, which is very attractive to foreign issuers.
On June 17, Pan Gongsheng, Governor of the People’s Bank of China, announced at the 2026 Lujiazui Forum that he would create a repurchase tool for overseas central banks, including overseas central banks or monetary authorities, international financial organizations, and sovereign wealth funds. They can use high-grade bond repurchases such as Chinese government bonds to obtain RMB liquidity from the People’s Bank of China to facilitate RMB liquidity management and RMB asset allocation by overseas central bank institutions.
While issuers can raise yuan funds within China, the process of moving funds overseas is complicated, so panda bonds mainly attract companies with large operations in China.
However, as China shows its intention to relax its policies, sovereign borrowers such as Kazakhstan and Pakistan will have greater motivation to issue panda bonds.
Peter Alexander, founder of consulting firm Z-Ben Advisors, said: “The panda bond market has been growing over the past two years, and it should be regarded as an important part of the RMB internationalization strategy.” He pointed out that China is also actively promoting the RMB cross-border payment system, encouraging the use of RMB in commodity trade settlement, and deepening the offshore RMB market.
Analysts generally believe that the strong momentum of panda bonds will not subside in the short term. China’s banking system has ample liquidity and U.S. interest rates are expected to remain at relatively high levels, which will support the steady growth of panda bond issuance for the rest of the year.
