China debt: Guangdong, Shenzhen eye foreign capital boost via offshore bond sales in Hong Kong and Macau

Shenzhen city and Guangdong province are keen on selling billions of yuan worth of bonds directly beyond mainland borders – a first for China’s local-level governments

The money is expected to boost Greater Bay Area’s development, but finance authorities have not said what the funds may be spent on

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Debt-sale announcements by Shenzhen (pictured) and Guangdong came as the central government has tightened its supervision of local government borrowing to pay for infrastructure investments and property construction this year. Photo: Xinhua

Published: 7:30pm, 25 Aug 2021Updated: 9:38am, 26 Aug 2021

In a bid to tap into foreign investments and boost the local economy, China’s southern tech hub and mass-manufacturing powerhouse are planning to issue offshore bonds in Hong Kong and Macau – marking the first direct offshore debt sales by local-level authorities in the country.

The Shenzhen Finance Bureau plans to sell up to 5 billion yuan (US$772 million) worth of bonds via Hong Kong. Meanwhile, provincial finance authorities for Guangdong say an unspecified amount of bonds will be sold via Macau to enhance the development of the Greater Bay Area, in line with Beijing’s intentions.

There was no indication of what the funds would be used for. The plan looks to follow through on a January 2020 proposition by Shenzhen’s finance authorities at the annual local legislature meeting.

Analysts say bond sales in Hong Kong and Macau would help the governments of Shenzhen and Guangdong diversify their funding channels and broaden their investor base.

The funds raised offshore will be channelled back to local governments and will likely go into infrastructure projects

Banny Lam

Both the city- and provincial-level governments published notices on Tuesday seeking underwriters and lawyers for their offshore debt sales.

Banny Lam, head of research at CEB International Investment, also noted that the fundraising exercise in Hong Kong and Macau reaffirms the central government’s plan to support the Greater Bay Area – a development plan to link the cities of Hong Kong, Macau, Guangzhou, Shenzhen, Zhuhai, Foshan, Zhongshan, Dongguan, Huizhou, Jiangmen and Zhaoqing into an integrated economic and business hub.