China's offshore yuan bond issuance reached a record high of 870 billion yuan.

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Record Growth and Currency Shift

The offshore yuan bond market is on track for its strongest year ever, with issuance expected to reach about 870 billion yuan, surpassing 2023’s total. This marks the eighth consecutive year of growth and signals a move away from reliance on the US dollar. International borrowers and investors are attracted by favorable funding conditions and a strengthening yuan. The market is becoming a significant conduit for global capital flows.

Low Rates and Long‑Term Confidence

China’s low interest rates have made offshore yuan debt markedly cheaper than financing in other major currencies. issuers have taken advantage of this to lock in long‑dated funding, with a record 152 dim‑sum bonds of ten years or more sold this year. High‑profile participants such as Temasek, Chubb and Tencent have issued 30‑year yuan bonds, broadening market appeal. The 10‑year Chinese government yield of roughly 1.84% stays well below the 4.16% yield on comparable US Treasuries.

Currency Movements Fuel Demand

A 3.9% depreciation of the US dollar against the yuan this year has prompted investors to add yuan‑denominated assets to diversify away from dollar exposure. Chinese companies, facing high US‑dollar borrowing costs, are refinancing dollar debt with cheaper yuan bonds to cut expenses and hedge exchange risk. Around $750 billion of US‑dollar bonds are outstanding, with a third maturing in the next two years, creating steady demand for yuan issuance.

New Issuers and Policy Support

Sovereign and quasi‑sovereign borrowers such as Indonesia and Kazakhstan’s Development Bank have entered the offshore yuan market, expanding its issuer base. Regulators have broadened the Southbound Bond Connect program to include non‑bank financial institutions and are weighing higher investment quotas. Despite thin trading and limited hedging tools, stronger policy backing and growing confidence suggest continued expansion of the yuan bond market.

China's offshore yuan bond issuance reached a record high of 870 billion yuan.

Record Growth and Currency Shift

Low Rates and Long‑Term Confidence

Currency Movements Fuel Demand

New Issuers and Policy Support

China's offshore yuan bond issuance reached a record high of 870 billion yuan.