20260302-中诚信国际-Standing_at_New_Starting_Point--_Review_of_the_Panda_Bond_Market_in_2025_and_Outlook_for_2026_12页_400kb

Summary of the Panda Bond Market in 2025 and Outlook for 2026

Core Content

The Panda Bond market has reached a new stage of development in 2025, with cumulative issuance exceeding RMB 1 trillion. Despite a slight annual decline in issuance scale, the market has seen significant structural improvements, including increased participation from pure overseas issuers and a shift toward longer maturity bonds. The market is evolving into a mature platform for onshore RMB asset allocation, attracting both international and domestic investors.

Main Points and Key Information

1. 2025 Market Performance

• Cumulative Issuance Scale: Exceeded RMB 1 trillion, with a total of 710 Panda Bonds issued from 2005 to 2025.
• Annual Issuance Scale: RMB 183.56 billion, representing a year-on-year decrease of 5.8%.
• Number of Issuances: Hit a record high, with 124 Panda Bonds issued by 44 entities.
• Primary Issuance Venue: The interbank bond market accounted for 94.4% of the total issuance, while the exchange market saw a slight increase to 5.6%.
• Issuer Composition:
  • Non-financial issuers: 65.7%
  • Financial issuers: 10.1%
  • Multilateral development institutions (MFIs): 20.4%
  • Sovereign and local government issuers: 3.8%
• Pure Overseas Issuers: Their issuance scale reached RMB 86.4 billion, accounting for 47% of the total, up from 40% in 2024.
• Tenor Trends: Bonds with maturities of 5 years or more increased from 23.5% in 2024 to over 30% in 2025, indicating stronger investor confidence.

2. Representative Cases in 2025

• African Export-Import Bank: Issued the first Panda Bond by an African MFI, RMB 2.2 billion, with a 3-year maturity and 2.99% coupon rate.
• German Multinationals: Continued to be active, with Volkswagen, Mercedes-Benz, BMW, BASF, and Bayer issuing Panda Bonds totaling RMB 24 billion. Henkel Group issued its debut Panda Bond in early 2026.
• Foreign Financial Institutions: Barclays, CIMB, and Morgan Stanley issued their first Panda Bonds, with Morgan Stanley’s issuance marking the first by a U.S. entity.
• Yuexiu Real Estate Trust: Launched the first listed REITs Panda Bond, RMB 0.6 billion, through an offshore SPV, showcasing market innovation.

3. 2026 Market Outlook

• Policy Support: The People's Bank of China has committed to deepening financial market opening and improving the RMB's role in cross-border transactions.
• Tax Exemptions: Corporate income tax and VAT on bond interest income for overseas investors in the domestic bond market will be temporarily exempted from 2026 to 2027.
• Financing Advantages: RMB financing remains cost-effective due to China’s stable monetary policy and relatively low interest rates.
• Exchange Rate Stability: Expected to remain generally stable, supporting RMB financing for overseas entities.
• Market Expansion: The market will continue to grow, with a focus on diversification and high-quality development.
• Risk Management: The market faces challenges such as credit risk, information asymmetry, and institutional barriers, requiring a balanced approach to expansion and regulation.

Strategic Recommendations for 2026

• Improve Risk Pricing: Strengthen credit ratings and information disclosure to support market expansion.
• Differentiated Market Access: Streamline procedures for high-creditworthy entities and broaden RMB fund repatriation channels.
• Sustainable Standards: Align Panda Bond sustainability criteria with international norms and reduce certification costs.
• Cross-Border Infrastructure: Enhance RMB circulation mechanisms, such as Bond Connect, and expand offshore RMB asset pools.

Conclusion

The Panda Bond market is transitioning from a pilot channel to a core platform for RMB internationalization. With policy support, structural improvements, and increasing participation from global and regional entities, it is well-positioned for continued growth in 2026. However, a focus on quality control and risk management is essential to ensure sustainable and high-quality development.