Panda bond issuance and subscription in the first quarter are thriving, with the domestic financing environment's attractiveness continuing to rise.

Source: Shanghai Securities News
Author: Zhang Xinran, Huang Bingyu

Driven by multiple factors such as advantages in domestic financing costs, the continued push for institutional-level opening up, and increased demand for renminbi asset allocation, the panda bond market has kept heating up. As of March 20, 2026, the issuance volume of panda bonds this year has reached RMB 77.94B, up 96.8% from the same period last year. Changes have also emerged in the issuer structure, maturity structure, and market functions.

The panda bond market has continued to run hot, first benefiting from the appeal of the domestic financing environment. Liang Huaxin, an analyst from the International Business Rating Department of CCL (China Chengxin International Credit Rating?), told a reporter from Shanghai Securities News that the currently active panda bond market can be summarized as a convergence of three factors: “favorable timing, advantageous conditions, and favorable people”: “favorable timing” refers to China’s relatively more accommodative monetary environment, which highlights the advantage of RMB financing costs; “advantageous conditions” refers to China’s continued advancement of two-way opening of financial markets, as well as ongoing improvement of the panda bond issuance rules and supporting infrastructure, lowering issuance friction costs; “favorable people” refers to the fact that in a low interest-rate environment, investors’ demand for allocating high-quality RMB assets has clearly increased.

Cheng Zeyu, a senior analyst at United Credit Rating, also said that since the panda bond market started in 2005, it has moved from early pilot exploration into a mature expansion phase. Entering 2026, the panda bond market continues to maintain a strong growth momentum. In his view, this round of expansion is not driven by a single factor, but is the result of the combined effects of the advantage in financing costs, the dividends of institutional-level opening up, improved attractiveness of RMB assets, and the concentrated release of refinancing demand.

From the perspective of market structure, changes are also evident: first, the participation level of foreign-invested entities has increased. Liang Huaxin said that in 2025, the number of panda bond issuances and the issuance scale by pure foreign-invested entities accounted for 34% and 47% of total market issuance for the full year, respectively, higher than 27% and 38% in 2024. Entering 2026, the participation of pure foreign-invested entities remains active, and market heat for the full year is expected to continue. Second, the maturity structure has gradually lengthened. Cheng Zeyu said that in 2025, 3-year and 5-year tenors have become the mainstay, with their issuance scale accounting for 60% and 20%, respectively. Third, credit quality remains at a high level. Liang Huaxin noted that the panda bond market is still dominated by AAA-rated issuers, reflecting the ongoing attractiveness to high-quality issuers.

Zhu Tong, General Manager for Deutsche Bank China, told a reporter from Shanghai Securities News that Deutsche Bank is the first European financial institution to issue panda bonds this year, and it also set a record for the single-panda-bond issuance size by a foreign bank.

Besides the advantage in financing costs, the continued deepening of institutional-level opening up also provides a more solid foundation for the panda bond market to expand. Liang Huaxin said that the recent fervor in the panda bond market is not a passing fad, but rather the result of planning and then acting. From the gradual unification of rules across markets, to the rollout of the DFI registration model, and then to the implementation of cross-border cash pooling arrangements, a series of key bottlenecks in the panda bond market have been progressively cleared, which will increase issuance willingness among overseas issuers.

Looking ahead, interviewees generally believe that the panda bond market still has room for further development, and that internationalization and diversification will be the main themes of the next phase.

Liang Huaxin said that the panda bond market has already formed a pattern of “red-chip platform-building as the foundation, with foreign capital moving forward in parallel.” In the future, the potential growth points mainly include three categories of issuers: first, national government institutions with relatively solid ties to China in terms of economic and trade relationships; second, foreign-invested enterprises with solid business foundations in China and plans to continue expanding their investments in China; third, overseas financial institutions with strong capital strength and large-scale renminbi business operations.

“Regulators have always taken a supportive attitude toward the panda bond market and encourage more global issuers to enter this market. In the future, if foreign banks’ capital instruments can be further accepted, the market space for panda bonds will continue to open up,” Zhu Tong said.

(Editor: Wen Jing)

Keywords:

                                                            Panda bonds