Chinese issuers get second wind in Asian G3 bond market
Trade tensions have little impact as firms’ credit ratings remain stable
25 Feb 2021 | Derrick Hong

Following a record-breaking year in 2020, the Asian G3 bond market continues to see robust issuance from Chinese borrowers. "We see over US$200 billion bonds maturing in 2021, 20% up from 2020. There will be US$196.5 billion due in 2022," says David Mao, managing director, Asia debt capital markets, loans & acquisition finance, at Citi.

According to Mao, G3 bonds from Chinese issuers amounted to US$220 billion in 2020, accounting for 65% of total Asian G3 bonds issuance. The vast majority of bonds from Chinese issuers are for refinancing purposes in the offshore market.

A few Chinese property developers have tapped the market this year. On February 22, China Aoyuan Group returned to the US dollar bond market and priced a US$350 million offering, representing its longest bond maturity ever. In January, Yuzhou Group Holdings Company and Zhenro Properties Group priced green bonds amounting to US$562 million and US$400 million, respectively.

In 2020, a number of Chinese entities were included in the Office of Foreign Assets Control (OFAC) sanctions list under the administration of then US President Donald Trump. Despite US-China tensions, however, Chinese state-owned enterprises were still able to raise capital in the US dollar bond market.

"Restrictions imposed on some Chinese companies did not affect their operations and their credit ratings remained stable,” says Mao. “Although some investors may be restricted to participate in some deals, given large size of the bond market and the diversity of investors, we don’t really see any material impact from the US-China trade frictions.” 

Also in January, China Petroleum and Chemical Corporation (Sinopec) closed a multi-tranche bond deal totalling US$3 billion, consisting of US$1.15 billion for five years, US$1.20 billion for 10 years and US$650 million for 30 years.

The National Development and Reform Commission and the State Administration of Foreign Exchange have been supporting Chinese issuers of US bonds over the past few years. The widened spread between the onshore and offshore credit markets have also prompted increasing interest from Chinese issuers.  

According to Refinitiv, total US bond issuance from Chinese issuers amounted to US$23.78 billion in January, up 18.2% from a year ago. 

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