In a move that’s sure to shake up the financial markets, the Shenzhen government announced on Monday its plan to unleash a whopping 7 billion yuan (US$964.4 million) worth of dim sum bonds – yuan-denominated offshore bonds – in Hong Kong. This is not just any bond offering; it’s their fourth and largest issuance in as many years, pushing the total funds raised to a staggering 22 billion yuan since their first foray in 2021.
This year’s offering is set to be groundbreaking, introducing a 10-year tranche for the first time, alongside the familiar two-, three-, and five-year tranches. Details are still under wraps, but what we do know is that a cadre of 29 banks, including heavyweights like HSBC, Standard Chartered, and Bank of China (Hong Kong), plus international titans such as Citigroup, Morgan Stanley, and JPMorgan, are on board as underwriters.
Shenzhen’s government is billing this bond issue as a strategic move to enhance financial market connectivity within the Greater Bay Area. And the plans for the funds are ambitious: two-year tranches will bankroll new secondary school facilities, three-year green bonds will funnel resources into eco-friendly infrastructure like underground trains, five-year bonds will boost rail transport, and the 10-year tranches will support long-term sustainability projects across healthcare, education, and retirement services.
Despite China’s comparatively low government debt-to-GDP ratio – just 77% at the end of 2022 versus 121% for the US and an eye-watering 261% for Japan – there’s plenty of room for local governments to raise funds through bond issuances. This latest bond push is part of a broader strategy to integrate the Greater Bay Area, a sprawling economic hub that includes Hong Kong, Macau, and nine cities in Guangdong province.
(Source: SCMP)
