IFC makes pitch to Beijing on panda bond sale
The International Finance Corp, the World Bank's private-sector arm, is lobbying Chinese regulators to back its plan to issue yuan-denominated bonds in the onshore market.
The International Finance Corp, the World Bank's private-sector arm, is lobbying Chinese regulators to back its plan to issue yuan-denominated bonds in the onshore market.
Approval for the sale of the so-called panda bonds would mark a step forward in Beijing's goal of further opening up the world's third-largest debt market.
The IFC is having "closed discussions" with the Ministry of Finance and the People's Bank of China over the plan to sell the panda bonds and the issue size will be "very big", Jingdong Hua, vice-president and treasurer of the IFC, was quoted by Reuters as saying yesterday.
China lacks clear rules for the issuance by foreign institutions or companies of yuan-denominated debt in the onshore market, leaving would-be issuers subject to case-by-case approval from a number of regulators.
Asked whether the bond would be sold this year, Hua was quoted by Reuters as saying: "I'm very optimistic, but let's see how the approval process goes."
Despite China's relatively high borrowing costs, multinational companies with offices in China could benefit from the issuance of local debt as it would help reduce exposure to currency risk. The IFC was the first foreign organisation to issue yuan-denominated bonds in China's onshore debt market, followed by the Asian Development Bank. In October 2005, the IFC sold 1.13 billion yuan of 10-year bonds with a 3.4 per cent yield. Aside from the IFC and the ADB, only German carmaker Daimler, with a 500 million yuan (HK$634 million) deal, has subsequently issued panda bonds.
Guidelines in 2013 for the Shanghai free trade zone said foreign firms registered there would be allowed to issue panda bonds. No further details have been released. The IFC did not immediately respond to requests for comment yesterday.
