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The decision of China’s exchanges to bar mainland investors from dual-class stocks may not seem like much in the grand scheme of things, but it is the darkest moment for China's market reform path since the infamous summer of 2015.
Chinese president Xi Jinping delivered the message everybody wanted to hear: despite the trade spat with the US, China will keep opening up its markets to foreign firms. But the speech was light on substance. The remarks feel like more of China’s vintage ‘stall and delay’ strategy rather than the much-touted ‘new era’. That could backfire, especially since Donald Trump seems hell-bent on making his aggressive trade policy towards China a reality.
Panda bond issuance has so far been dominated by overseas-incorporated Chinese names. That bolsters volumes, but it does little to help the market fulfil its role of boosting RMB internationalisation. Policymakers have the chance to fix it — but only if they are bold enough to let markets play a bigger role.
China’s offshore renminbi bond market has made a strong start to the year, with two foreign issuers already selling dim sum notes. The signs for a robust 2018 are there but the market’s return to form will be contingent on more than just issuer interest.
DCM bankers often market Panda bonds as Belt and Road bonds, even when they have little to do with China’s landmark infrastructure plan. But in recent weeks, issuers with genuine needs for funding Belt and Road projects have started to tap the market. The change could open up a new frontier for RMB internationalisation.
Foreign ownership reform in the Chinese financial sector is not only a landmark in the country’s opening up, but also a strategic move to rebalance US-China trade. But recent guidelines curtailing banking sector liberalisation appear to be a case of one step forward, two steps back for China. Now more than ever, Beijing must not let its caution around financial risk take over and undo its strategy.
The hubbub over China’s five-yearly Party Congress is now behind us and the country’s regulators are ready to get back to business. In that vein, unusually forceful comments from Zhou Xiaochuan, outgoing governor of the People's Bank of China, on the urgency of deleveraging are more than welcome.
China’s extraordinary liberalisation of its financial markets last week, which cleared the way for foreign ownership of a range of financial institutions, has only found mild enthusiasm among foreign banks so far. They can be forgiven for not immediately breaking out the champagne.
Recent deals are breathing life into a dim sum bond market that has faced a drought in supply. And with market conditions turning in the sell side’s favour, more issuers should syphon off this renminbi funding stream.
Xi Jinping's first term has seen a series of concrete steps taken towards opening up the country's capital markets. With the five-yearly Party Congress starting this week, it is now time for China's leadership to take the leap from granting access to giving global investors real influence on the market.
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Latest news by market and league table performance
GlobalRMB Panda Bonds league table
|Rank||Arranger||Share % by Volume|
|1||China Merchants Securities Co||18.42|
|3||Agricultural Bank of China (ABC)||12.79|
|3||Industrial and Commercial Bank of China (ICBC)||12.79|
|5||China CITIC Bank Corp||11.51|
Panda Bond Database
|Pricing Date||Issuer||Country||Size Rmb (m)|
|1||13-Jul-18||Hang Lung Properties||Hong Kong||1,000|
|2||28-Jun-18||China Water Affairs Group||China||200|
|3||26-Jun-18||Want Want China Holdings||Taiwan||500|
|4||14-Jun-18||Bank of China Group Investment||China||1,000|
Offshore RMB Bond Top Bookrunners
|Rank||Bookrunner||Share % by Volume|
|1||Standard Chartered Bank||33.47|
|4||Bank of Taiwan||4.07|
|4||Cathay United Bank||4.07|
Latest Offshore RMB Bonds
|Pricing Date||Issuer||Country||Size Rmb (m)|
|1||21-Jun-18||Shimao Property Holdings||China||1,200|
|2||19-Jun-18||Korea Development Bank (KDB)||South Korea||1,750|
|3||07-Jun-18||Export-Import Bank of Korea (Kexim)||South Korea||1,500|
|5||16-May-18||First Abu Dhabi Bank PJSC||United Arab Emirates||1,100|