Analysis of rules for offering Panda bonds

Q: What is a Panda bond? A: The term “Panda” refers to a bond denominated in renminbi, which a foreign organization issues in China (other than Hong Kong, Macau and Taiwan). In accordance with international practice, when a foreign organization offers bonds in a country, it will usually name them using a lucky symbol particular to that country. Based on this practice, renminbi-denominated paper that foreign organizations issue in China are called Panda bonds.

Q: What kind of development have Panda bonds undergone? A: Panda bonds were first issued in October 2005, when the International Finance Corporation and the Asian Development Bank offered RMB1.13 billion (US$139 million) and RMB1 billion worth of such paper, respectively, on the national interbank bond market (the interbank market). To date, there have been more than 30 issues of Panda bonds for a total of more than RMB50 billion. However, for a long time, regulators had not drawn up any specific regulations for Panda bonds (other than for international development institutions). On 25 September 2018, the People’s Bank of China and the Ministry of Finance issued Interim Administrative Measures for the Offering of Bonds on the National Interbank Bond Market by International Organizations (the Measures), regulating, for the first time, such issuance.

Q: What foreign organizations can issue Panda bonds? A: Pursuant to the Measures, among those able to issue Panda bonds are: (1) foreign governmental organizations; (2) international development institutions; and (3) financial institutions with legal personalities and non-financial enterprises with legal personalities lawfully registered outside China. Foreign governmental organizations include sovereign national governments, local governments and organizations with governmental functions. The term “international development organizations” refers to multilateral, bilateral and regional international development financial institutions that offer development loans and carry out developmental investments.

Ren Gulong and Zhang Di are partners at AnJie Law Firm