When looking at the potential challengers for USD bond issuance, ‘Panda’ bonds (issued in CNY, on the domestic mainland China market by foreign entities) have been discussed a lot in the media, but the volumes involved have been relatively small so far, especially when drilling down into true foreign entities (i.e., excluding offshore units of Chinese companies).
Annual volumes in recent years have been a few billion dollars. Of note, there has been some supranational issuance, including from the BRICS New Development Bank, along with some issuance from European financials and auto companies. In the EM space, there have been some small deals for Hungary, Poland, the Philippines, Sharjah (UAE) and South Korea.
The market for ‘Dim Sum’ issuance (issued in renminbi, offshore in Hong Kong) is more developed, but again volumes have been relatively low, especially when excluding Hong Kong and China entities. A relative lack of liquidity and lingering investor concerns over potential capital controls may be inhibiting the growth of the market. In this respect it seems the renminbi has not yet registered in most investors’ consciousness for bond issuance.
One area within emerging markets where we can see some signs of ‘de-dollarisation’ over the past decade or so has been where governments are attempting to avoid the ‘original sin’ of issuing too much debt in foreign currencies (Figures 27 and 28). As capital markets and economies have developed, many emerging market sovereigns have been able to fund much more of their borrowing needs via issuing domestic, local currency debt
