China's bond market, as a critical component of the country's capital markets, has been growing rapidly over the past few years.
According to the data released by the People's Bank of China (PBOC), China's central bank, during the China Debt Capital Markets Summits 2018 which was held on Wednesday in Beijing, as of the end of 2017, with a total balance of roughly RMB 75 trillion, China's bond market has become the third largest in the world, ranking only after the U.S. and Japan.
Obviously, such a huge bond market has become increasingly attractive to borrowers from around the world. As a result, China has seen a significant growth in the issuance of panda bonds, which are a major debt financing instrument for foreign borrowers in China's debt market. The PBOC's data also showed that by the end of 2017, over RMB 123.4 billion worth of panda bonds had been issued, with the issuers including foreign governments, international investment institutions, overseas financial institutions, and overseas non-financial enterprises.
Despite a drastic decline in the panda bonds issuance in China's Shanghai and Shenzhen stock exchanges last year due to the rising borrowing costs and the strengthening of capital control by the Chinese government, CG Lai, Head of Global Markets, Greater China, BNP Paribas, is still optimistic about the issuance of panda bonds this year.
During an interview with this reporter on Wednesday, Mr. Lai noted that the panda bond issuance in China's interbank market still maintained a steady development trajectory last year as more foreign sovereign investment funds entered the country's interbank market.
When answering the question about what particular role foreign banks are playing the panda bond issuance, Mr. Lai said that "since the vast majority of panda bond issuers are overseas companies, compared with Chinese banks, foreign banks are more familiar with these companies and thus can better help them with the panda bond issuance."
"Actually, the reason why the Chinese government allowed foreign banks to be the underwriters of the panda bond issuance in the first place is that it hoped that foreign banks could bring more overseas companies into China's debt market," he added.
Mr. Lai also discussed with this reporter on how BNP Paribas has been helping the countries covered by China's grand Belt and Road Initiative raise funds from China's bond market for the construction of their infrastructure projects.
"Since our bank's business has expanded to 28 out of the 65 countries along the new and maritime silk roads, we are definitely willing to help these countries issue bonds in overseas bond markets," said Mr. Lai.
According to Mr. Lai, the BNP Paribas is now helping these countries benefit from the Belt and Road initiative in two ways. One way is to facilitate their bond issuance in the overseas bond markets other than China. The other way, which is more important, is to draw on China's bond market to fund the infrastructure projects in those nations.
During the process of the panda bond issuance, credit rating agencies always play a critical role. As part of the further opening-up of China's bond market, China formally permitted the registration of foreign credit rating agencies in China on March 27, a day before the summit.
The potential entry of foreign credit rating agencies highlights the sharp difference in the rating standards used by Chinese credit rating agencies and their foreign peers. Mr. Lai thought that although it is crucial to develop a unified rating standard, the process won't be finished very soon.
Mr. Lai also shared his opinions on the future development of China's bond market. "The size of China's bond market has been huge," said Mr. Lai. "The next step should be a further optimization of this market." He expected to see more diversified participants, the introduction of new derivative products, as well as the reform of the bond underwriting system.
When it comes to the significance of the recent inclusion of Chinese bonds into the Bloomberg Barclays Indices, one of the world's major bond indexes, Mr. Lai thought that the inclusion will prompt more foreign investors to invest in China's bond market.
According to the data released by the People's Bank of China (PBOC), China's central bank, during the China Debt Capital Markets Summits 2018 which was held on Wednesday in Beijing, as of the end of 2017, with a total balance of roughly RMB 75 trillion, China's bond market has become the third largest in the world, ranking only after the U.S. and Japan.
Obviously, such a huge bond market has become increasingly attractive to borrowers from around the world. As a result, China has seen a significant growth in the issuance of panda bonds, which are a major debt financing instrument for foreign borrowers in China's debt market. The PBOC's data also showed that by the end of 2017, over RMB 123.4 billion worth of panda bonds had been issued, with the issuers including foreign governments, international investment institutions, overseas financial institutions, and overseas non-financial enterprises.
Despite a drastic decline in the panda bonds issuance in China's Shanghai and Shenzhen stock exchanges last year due to the rising borrowing costs and the strengthening of capital control by the Chinese government, CG Lai, Head of Global Markets, Greater China, BNP Paribas, is still optimistic about the issuance of panda bonds this year.
During an interview with this reporter on Wednesday, Mr. Lai noted that the panda bond issuance in China's interbank market still maintained a steady development trajectory last year as more foreign sovereign investment funds entered the country's interbank market.
When answering the question about what particular role foreign banks are playing the panda bond issuance, Mr. Lai said that "since the vast majority of panda bond issuers are overseas companies, compared with Chinese banks, foreign banks are more familiar with these companies and thus can better help them with the panda bond issuance."
"Actually, the reason why the Chinese government allowed foreign banks to be the underwriters of the panda bond issuance in the first place is that it hoped that foreign banks could bring more overseas companies into China's debt market," he added.
Mr. Lai also discussed with this reporter on how BNP Paribas has been helping the countries covered by China's grand Belt and Road Initiative raise funds from China's bond market for the construction of their infrastructure projects.
"Since our bank's business has expanded to 28 out of the 65 countries along the new and maritime silk roads, we are definitely willing to help these countries issue bonds in overseas bond markets," said Mr. Lai.
According to Mr. Lai, the BNP Paribas is now helping these countries benefit from the Belt and Road initiative in two ways. One way is to facilitate their bond issuance in the overseas bond markets other than China. The other way, which is more important, is to draw on China's bond market to fund the infrastructure projects in those nations.
During the process of the panda bond issuance, credit rating agencies always play a critical role. As part of the further opening-up of China's bond market, China formally permitted the registration of foreign credit rating agencies in China on March 27, a day before the summit.
The potential entry of foreign credit rating agencies highlights the sharp difference in the rating standards used by Chinese credit rating agencies and their foreign peers. Mr. Lai thought that although it is crucial to develop a unified rating standard, the process won't be finished very soon.
Mr. Lai also shared his opinions on the future development of China's bond market. "The size of China's bond market has been huge," said Mr. Lai. "The next step should be a further optimization of this market." He expected to see more diversified participants, the introduction of new derivative products, as well as the reform of the bond underwriting system.
When it comes to the significance of the recent inclusion of Chinese bonds into the Bloomberg Barclays Indices, one of the world's major bond indexes, Mr. Lai thought that the inclusion will prompt more foreign investors to invest in China's bond market.
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