Highlights of panda bonds policies in the interbank bond market

Panda bonds are renminbi-denominated bonds issued in the PRC by non-Chinese issuers. Data from the People’s Bank of China (PBOC) show that by the end of 2018 panda bonds worth up to nearly RMB200 billion (US$29.56 billion) had been issued, with the scope of qualified issuers expanding, from international development agencies initially, to include foreign governments, foreign financial institutions and non-financial companies.

Years have passed, but no systemic rules have been introduced to regulate the issuance of panda bonds, except those from international development agencies. In most cases panda bonds have been issued with reference to conditions and requirements applicable to bond issues from Chinese entities, and panda bond issues have been launched on a pilot basis. These give rise to uncertainties surrounding panda bond policies and concerns about unestablished and non-transparent issuance process.

In September 2018, the Interim Measures for the Administration of Issuance of Bonds in the National Inter-bank Bond Market by Foreign Institutions (Measures) were jointly released by the PBOC and the Ministry of Finance. The National Association of Financial Market Institutional Investors (NAFMII) has also started formulating more specific guidelines for panda bonds, and recently released the Business Guidelines for Debt Financing Instruments of Foreign Non-financial Enterprises (Trial) (Business Guidelines).

Zhang Lei is a partner at Jingtian & Gongcheng