Key takeaways
- RMB bond markets are becoming a more compelling funding option for international borrowers
- Issuers must weigh the lower borrowing costs of panda bonds against the speed and flexibility offered by dim sum bonds
- Regulatory reforms are improving market access, but execution remains complex for panda bond issuances
International borrower demand for RMB-denominated bonds is soaring as global companies and sovereigns seek to diversify funding sources and lower debt financing costs.
Issuance of panda bonds (RMB-denominated bonds issued by overseas entities in China’s domestic onshore market, also known as the CNY market) has reached record highs, standing at RMB160 billion (US$23.7 billion) in H1 2026, up more than 60% compared to the same period in 2025, according to reporting by the South China Morning Post. The market for dim sum bonds (RMB-denominated bonds issued offshore, usually through Hong Kong) is also performing strongly. Issuance climbed to RMB358 billion in H1, also up more than 60 percent year-on-year.
Mitigating concentration risk
Interest rates in the US are expected to remain elevated to combat inflation, while the People’s Bank of China keeps base rates low to stimulate the economy. This has created a significant difference between the borrowing costs in US dollars and RMB. For international borrowers, that difference has made panda and dim sum bond markets increasingly attractive.
As of August 27, 2026, foreign sovereigns and companies have priced panda bonds at an average coupon of 1.88% so far in 2026, more than 200 basis points lower than the three-year US Treasury yields, according to Bloomberg. Swiss bank UBS, as noted in its press release, priced its inaugural panda bond with a coupon of 1.78%, the lowest rate achieved to date for a five-year panda bond issued by an overseas financial institution.
Meanwhile, as of September 30, 2026, dim sum bonds maturing in the next one to three years have a weighted average coupon of 2.34%, according to FTSE Russell data. They yield more than panda bonds. While onshore markets, which are subject to cross-border foreign exchange control, tap into cash-rich domestic institutions, the offshore RMB (or CNH) market has a much smaller liquidity pool and is more exposed to foreign exchange volatility. Therefore, dim sum bond investors typically demand a higher return to offset those risks. Nevertheless, dim sum bond coupons are competitive when compared to US dollar borrowing costs.
Shifting geopolitical conditions are also prompting issuers to increasingly explore ways to diversify funding sources and currency exposures. This has contributed, in part, to the sharp increase in both new and repeat overseas-issuer activity in RMB-denominated markets.
Indonesia and Pakistan are among the sovereigns that have tapped the panda bond market for the first time in 2026, while Kazakhstan is reported to be considering raising a second panda bond after a successful debut issuance in May 2026. Australian miner Fortescue is among the companies reportedly mulling an inaugural panda bond, while US banks are borrowing at record levels in dim sum markets.
Regulatory shifts boost issuance
Chinese policymakers have encouraged the internationalization of RMB-denominated bond markets. They have, for instance, streamlined the process for foreign issuers seeking to raise panda bonds and made it easier for domestic investors in mainland China to invest in Hong Kong’s offshore bond market.
In 2023, the People’s Bank of China and the State Administration of Foreign Exchange eased regulations that constrained the ability of panda bond issuers to remit proceeds offshore. Policymakers also standardized rules for panda bonds issued in the interbank market and the exchange-traded market, which were previously subject to disparate rulebooks and enforcement protocols.
Panda bonds remain closely regulated. Prospective issuers on the interbank market, which accounts for a vast majority of panda bonds issuances to date, must, among other things: register a panda bond issuance with the National Association of Financial Market Institutional Investors, a process that typically takes several months; obtain review and approval by the People’s Bank of China for foreign financial institution issuers; open a designated RMB settlement or escrow account; and meet strict use-of-proceeds criteria for capital raised. However, less restrictive rules on remitting proceeds overseas and much lower yields have made navigating the regulatory process worthwhile for many international issuers.
In addition to making the panda bond market more attractive for international issuers, policymakers have also supported the dim sum market by broadening access to the Bond Connect program, which provides a channel for mainland investors to invest in bonds issued in the offshore Hong Kong market. In 2025, institutional investors on the mainland were given access to the Hong Kong market, unlocking significant capital flows as mainland investors sought opportunities to build exposure to higher-yielding fixed income assets.
An international outlook
The combination of more affordable funding costs, geopolitical concerns and evolving regulation is reconfiguring both the panda and dim sum bond markets.
The panda bond market, for example, used to be dominated by Chinese real estate companies issuing panda bonds through entities incorporated in offshore financial centers such as the Cayman Islands and the British Virgin Islands. Today, it has become a truly global space that is attracting international issuers into China’s onshore capital markets.
The dim sum market, meanwhile, was until recently primarily used by Chinese financial institutions and local government financing vehicles, but is now being tapped more frequently by Chinese companies and international businesses.
Although onshore financing may be cheaper, Chinese companies are increasingly outward-looking and have valued the speed-to-market that a dim sum bond offers, particularly when compared to the longer timelines associated with securing regulatory approval in the domestic market. The offshore market also raises an issuer’s international profile and, since proceeds are not subject to foreign exchange controls, it makes it easier to secure cash for an investment in global operations.
RMB-denominated bond markets are evolving rapidly, with change being driven by macroeconomic as well as geostrategic factors. New market entrants and ongoing regulatory developments mean this space will likely continue to develop swiftly in the near term.