Panda vs samurai: China’s panda-bond market size tops Japan’s amid yuan internationalisation

Outstanding panda bonds have reached US$45 billion, exceeding the volume of yen-denominated samurai bonds, but account for just a small fraction of China’s overall bond market, according to a report by the Institute of International Finance (IIF) on Tuesday.

“The panda bond is helping the Chinese yuan become a global funding currency, as its yields have been falling rapidly in the past four years,” said Gene Ma, head of China research at the IIF. “It is also an important tool to make China’s financial markets and currency more global.”

The Washington-based institution attributed the bond’s expansion to regulatory easing, which has simplified the issuance process for foreign entities, alongside lower borrowing costs and improved market conditions.

Introduced in 2005 as part of China’s efforts to boost the yuan’s internationalisation, the panda-bond market is used as a capital-raising platform for foreign firms targeting domestic investors. As such, it helps those firms tap into the world’s second-largest economy at competitive rates. In 2023, issuance hit a record US$26.7 billion, a 26 per cent year-on-year increase.