China to sell first dollar bond in 13 years in Hong Kong to set benchmark for Chinese issuers

China’s Ministry of Finance has revealed plans to sell US$2 billion worth of dollar-denominated sovereign bonds in Hong Kong, its first dollar bond offering since October 2004, that will set a bellwether issue for other Chinese issuers amid a red-hot Asian corporate dollar bond market.

They will be issued in the coming days, and comprise of US$1 billion in five-year, and US$1 billion in 10-year notes.

Final details of the exact timing of the offer will be published ahead of the issuance, officials said, and listed in Hong Kong.

While China’s government does not need to borrow offshore, with a domestic debt market at US$9 trillion that’s now the world’s third-largest, analysts suggested the ministry’s decision to issue dollar bonds may be intended to create a benchmark standard which the performance of other dollar bonds issued by the country’s state-owned enterprises can be measured against.

Increased transparency in bond pricing may help other Chinese issuer to raise funds in Asia’s booming dollar bond market, and help push down their borrowing costs if the benchmark sale is successful.

“This new issue is going to set a credit benchmark for other Chinese issuers,” Frances Cheung, head of Asia macro strategy at Westpac Banking.