"Panda bonds are highly sought after, with Wall Street investors and multinational corporations turning to the Chinese bond market." According to a report by American consumer news and business channel CNBC on June 17, due to low interest rates in China and borrowing costs that are much lower than those in the US dollar market, more foreign borrowers are issuing bonds in China to raise funds in Renminbi. Analysts point out that this surge in panda bonds will expand the use of the Renminbi globally and accelerate its internationalization process.
Panda bonds refer to renminbi-denominated bonds issued by overseas institutions within the Chinese mainland. In recent years, the issuance of panda bonds has been strong. According to statistics from Moody’s, the issuance amount reached a new high of 197.8 billion yuan in 2024, and it reached 183.1 billion yuan in 2025. As of the second week of June, the issuance amount for 2026 had reached 137.1 billion yuan, an increase of 80.4% compared to the previous year.
Since the beginning of this year, the issuance of panda bonds has accelerated significantly. Sovereign borrowers such as Kazakhstan and Pakistan, global financial institutions like Morgan Stanley and Deutsche Bank, as well as multinational companies like Volkswagen and Hanson Mfg have all joined in. In late May, Deutsche Bank announced that it successfully raised 3.5 billion yuan through the issuance of 3-year and 5-year panda bonds that met with an oversubscribed demand.
According to data from Far East Credit Rating Agency Limited, in May this year, the total amount of Panda bonds issued reached 26.64 billion yuan, setting a record high for that month.
Why do panda bonds have such a strong appeal, attracting foreign governments, Wall Street banks, and multinational corporations to China's bond market? CNBC points out that this is mainly due to the lower borrowing costs in China.
New York, Wall Street, USA – IC Photo
Reports indicate that the Federal Reserve continues to maintain high interest rates, resulting in high borrowing costs in the dollar market. However, China’s loose monetary policy has brought domestic interest rates close to low levels. Analysts estimate that many foreign issuers can raise RMB funds at a coupon rate of less than 3%, making such financing much cheaper compared to similar dollar-based financing options.
Moody's told CNBC, "We believe the key driver is the interest rate difference; financing in Renminbi is much cheaper than in US dollars." The institution noted that the borrowing rates for foreign banks issuing panda bonds are around 1.7% to 2.2%, while those in the US dollar market range from 4.5% to 5.5%. This means that panda bonds can save issuers 2 to 3 percentage points in interest expenses.
Analysts believe that this cost advantage has turned the Chinese yuan into a financing currency. Moody’s estimates that financial institutions remain the main issuers of Panda bonds, followed by sovereign and supranational borrowers. Multinational corporations with large operations in China are also increasingly using this market for financing.
Eurasia Group's China Director, Wang Dan, said: "Wall Street banks are expanding their renminbi borrowing to meet the growing demand for renminbi in international trade settlements. Banks need to maintain larger amounts of renminbi debt and assets in order to continue acting as key correspondent banks and market makers for Chinese-related clients."
But low interest rates are not the only reason for the surge in the issuance of Panda Bonds. Alicia Garcia Erelo, chief economist for Asia-Pacific at investment management firm Natixis, said that China is showing a growing willingness to give issuers greater flexibility in the use of funds, which is very attractive to foreign issuers.
On June 17, Pan Gongsheng, President of the People's Bank of China, announced at the 2026 Lujiazui Forum that a foreign central bank repurchase instrument will be established. This instrument allows foreign central banks or monetary authorities, international financial organizations, and sovereign wealth funds to obtain Renminbi liquidity from the People's Bank of China by using high-grade bonds such as Chinese national bonds. This would facilitate the management of Renminbi liquidity and the allocation of Renminbi assets for foreign central bank-like institutions.
According to CNBC, although issuers can raise funds in RMB within China, the process of transferring funds overseas is very complicated. Therefore, Panda bonds mainly attract companies with large operations in China. However, as the Chinese side shows intentions to relax policies, sovereign borrowing countries such as Kazakhstan and Pakistan will have greater incentives to issue Panda bonds.
Consulting firm Z-Ben Advisors founder Peter Alexander said, “Over the past two years, the panda bond market has been growing, and it should be considered 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 the RMB in commodity trade settlements, and deepening the offshore RMB market.
Analysts generally believe that the strong momentum of panda bonds will not fade in the short term. The Chinese banking system has ample liquidity, and U.S. interest rates are expected to remain relatively high, which will support a steady increase in the issuance of panda bonds during the remainder of this year.
