PANDA
BONDS - ECONOMY
News:
BRICS New Development
Bank issues record amount of 5-year panda bonds
What's
in the news?
●
The BRICS New Development Bank announced
that it has issued 6 billion yuan (about 844.5 million U.S. dollars) of
five-year panda bonds in the China Interbank Bond Market.
●
The transaction is the largest-ever
five-year panda bond issuance, and it is the first panda bond issuance this
year by a multilateral development bank in the China Interbank Bond Market.
Key
takeaways:
●
Panda bonds are yuan-denominated bonds sold by non-Chinese issuers in the China
mainland market.
Panda
Bond:
●
Panda bonds refer to renminbi-denominated
bonds issued by foreign companies in the onshore Chinese market.
●
These bonds provide a unique avenue for international entities, including corporations
with operations in mainland China, governments, and financial institutions, to
raise funds within the country.
Backdrop:
●
Introduced in 2005 by the Asian
Development Bank and International Finance Corporation, panda bonds have
experienced increasing demand and their popularity continues to rise.
●
The name "Panda Bonds" is
derived from the reference to the Chinese
giant panda, which is a symbol of
China and represents the renminbi currency.
Significance:
●
Mitigation
of foreign exchange risks, as these bonds are denominated in
Chinese Yuan (renminbi).
●
Issuers can navigate the process of
raising funds in China without the complexities associated with repatriating
funds for offshore use.