Poland became the first European country to issue renminbi-denominated debt in China on Thursday, raising Rmb3 billion ($451 million) through the sale of three-year notes.
The landmark tapping of China's $7.5 trillion onshore market follows Chinese President Xi Jinping's state visit to Warsaw in June, part of a wider effort by Beijing to bolster its trade relationships with Europe and increase Chinese involvement in infrastructure projects.
After a two-day marketing campaign in Beijing and Shanghai, Poland gave out an initial guidance of 3.2% to 3.7%, drawing close to Rmb6 billion of orders from both overseas and domestic investors, two people familiar with the deal said.
Final pricing on the August 2019 note was fixed on par to yield 3.4%, according to a term sheet seen by FinanceAsia.
Bonds sold by foreign entities in China -- collectively known as panda bonds -- have gained in popularity since last autumn, when HSBC and Bank of China Hong Kong branch became the first overseas commercial banks to issue them. So Poland's success could pave the way for other sovereign European names.
One of the banking sources familiar with the transaction said the closest comparable for the new Poland bond is China Development Bank's 2.72% March 2019 issue, which yielded 2.75% ahead of final pricing. That's principally due to the liquid nature of the policy lender's outstanding issue.
The joint lead underwriters of the transaction were Bank of China and HSBC China.
Other sovereign pandas
South Korea, rated Aa2/AA/AA- by Moody's/S&P/Fitch, issued a Rmb3 billion three year bond in December that was five times oversubscribed and was the first sovereign issuer to raise funds onshore.
Other sovereign countries such as Hungary and Indonesia have expressed an interest in raising funds via the panda bond market. Export-Import Bank of Korea is also considering selling its maiden renminbi bond.
A total of $8.1 billion has been raised in the panda bond market so far this year compared with only $1.25 billion in 2015, according to Dealogic.
The surge in panda bond issuance underscores China's ambition to promote the greater use of renminbi and gradually open up its closely controlled capital account after the IMF approved the inclusion of the Chinese currency in the basket of currencies backing its special drawing rights.
Hungary issued Rmb1 billion worth of bonds in the offshore market in April but its economy minister, Mihaly Varga, has said that he remains keen to issue a panda bond by the end of this year.