More than half of the new issues of renminbi-denominated bonds in Hong Kong were from foreign entities last year, according to Standard & Poor's Capital IQ.
China has a $3.3 trillion (€2.6 trillion) domestic bond market. This compares to a $50 billion offshore bond market, the ‘dim sum’ bond market, nicknamed after the popular Hong Kong food. The domestic market is now the third largest, after that of the US and Japan.
“Foreign entities can certainly help to diversify the market, but they are unlikely to form the mainstay of issuance,” S&P Capital IQ’s research paper said. “That is because the renminbi is not usually an issuer’s primary, or even secondary, currency of operations.”
The authors argued the Ministry of Finance should take “primary responsibility for providing the necessary depth and liquidity that would help the offshore renminbi debt market to thrive”.
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