China's sovereign bond issuance inspires global confidence

China's latest US dollar sovereign bond issuance drew overwhelming global demand, underscoring investors' confidence in the country's economic restructuring and high-quality growth trajectory, financial experts said.

The strong reception also reflects Beijing's continued push to deepen its engagement with international capital markets through Hong Kong.

The Ministry of Finance raised $4 billion through a dual-tranche offering in the Hong Kong Special Administrative Region on Wednesday — $2 billion in three-year bonds yielding 3.646 percent and another $2 billion in five-year bonds at 3.787 percent.

The offering attracted $118.2 billion in orders, nearly 30 times the issuance amount, with the five-year tranche oversubscribed by 33-fold.

The investor base spanned Asia, Europe, the Middle East, and the United States, highlighting the broad appeal of Chinese sovereign debt. By investor type, sovereign institutions made up 42 percent, banks and insurers 24 percent, fund and asset managers 32 percent, and dealers 2 percent, according to the ministry.

"The Ministry of Finance's latest issuance has received a very positive response from international investors, reflecting the international market's strong confidence in the growth potential of China's economy," said David Liao, co-chief executive of Asia and Middle East at HSBC, a joint lead manager and joint bookrunner for the offering.

"The recently announced recommendations for the 15th Five-Year Plan emphasize 'promoting high-standard opening up', 'promoting the innovative development of trade', and 'expanding two-way investment cooperation'," said Liao. "This demonstrates the country's commitment to openness and collaboration, which is welcomed by the international market."

The issuance also demonstrates China's on-going efforts to deepen interaction with global capital markets, offering more choices for global investors for their multi-currency asset allocation, he added.

The offering of US dollar sovereign bonds by China's MOF in the Hong Kong SAR marks the seventh issuance of dollar-denominated bonds since the resumption of such issuances in 2017.

Analysts said this issuance demonstrates China's determination and steady progress in further opening its financial markets to the outside world.

Citi, a joint bookrunner and joint manager for the deal, said that the issuance underscores China's commitment to further connect with international investors, demonstrates the long-term growth potential of the Chinese economy, and provides investment opportunities for international investors to access the Chinese market.

Through the regular issuance of US dollar sovereign bonds, China aims to attract more medium to long-term institutions, further deepening the connectivity between China's financial markets and international capital markets, said Timothy Huang, head of JP Morgan's Global Corporate Banking for Greater China.

JP Morgan was a joint lead underwriter and bookrunner for the deal. Medium-to-long-term institutional investors typically focus more on fundamentals and long-term value. Their sustained engagement will further enhance international recognition of China's economic restructuring and high-quality growth, injecting confidence into global capital allocation toward high-quality Chinese assets, said Huang.

Deutsche Bank acted as a joint global coordinator, billing and delivery bank, and US fiscal agent for the deal.

"The issuance of US dollar bonds by the Ministry of Finance sends a positive signal to global markets, showcasing China's confidence and strength," Samuel Fischer, head of onshore debt capital markets at Deutsche Bank China, said. "Coming right after the release of recommendations for China's 15th Five-Year Plan and the conclusion of the APEC Economic Leaders' Meeting, the around $120 billion in total orders and 30 times oversubscription demonstrate strong market recognition."

The Hong Kong SAR is benefiting from China's renewed push for high-quality opening-up and renminbi internationalization, as well as the measures to strengthen its financial markets, said Fischer.

"We are also seeing positive spillover effects, including growing interest from investors across Asia and the Middle East in engaging with the China market," he said.

The choice of Hong Kong as the issuance venue also carries strategic weight. Analysts said it reaffirms the SAR's role as an international financial hub and a crucial bridge between China and global capital markets, reflecting Beijing's commitment to financial openness and stable, healthy economic development. This move expands the depth and breadth of Hong Kong's bond market, establishes a more reliable offshore yield curve, and provides a benchmark for Chinese enterprises in issuing US dollar bonds overseas, said Liao. He added that the issuance serves to enhance Hong Kong's position as a leading bond market in Asia.