British Columbia Issues RMB 3 Billion Panda Bond
By staff reporter ZHOU LIN The Canadian province of British Columbia (B.C.) issued a Panda bond on January 21, the first by a foreign country in China's interbank bond market. The three-year-term bond, priced at 2.95%, raised RMB 3 billion, or about CA$ 665 million.
Guy Saint-Jacques (third, left), Canadian Ambassador to the People's Republic of China, at the Media Briefing on British Columbia, Canada's Panda Bond Issue.
Proceeds were immediately reinvested in an offshore RMB-denominated investment with Singapore's United Overseas Bank. Net income on the RMB investment will be used to support and expand the province's trade and investment offices in China.
The bond was almost twice-oversubscribed by domestic investors in China, including policy banks, commercial banks, fund managers, and brokerage firms. Bank of China and HSBC are the joint leading underwriters of the bond, and the National Association of Financial Market Institutional Investors regulates the domestic bond market.
"This bond represents our commitment to build stronger, more robust ties with China's financial and economic markets and the broader Asia-Pacific region. British Columbia's triple-A credit rating gives our Province access to markets and investors we couldn't otherwise reach, and China's onshore market provides access to a diverse, relatively untapped group of investors," Finance Minister of British Colombia Province Michael de Jong said.
Sun Xinxia, Head of the Debt Capital Market Team, Bank of China Head Office further pointed out, "The success of British Columbia's Panda bond issuance has broadened the scope of issuing entities in China's inter-bank bond market, expanded the RMB financing channels for foreign governments, and acted as an important role in RMB internationalization and innovation of China's capital market."
Last month, B.C. has become the first sovereign government to establish a Panda bond program in China's onshore RMB market – the world's third-largest capital market. The Province received approval for a 6 billion RMB program, including pre-approved conditions on subsequent bonds to a maximum of 3 billion RMB each and terms of up to 10 years.
In 2013, British Columbia was the first foreign government to issue a bond into China's offshore RMB market. That bond and a subsequent bond in 2014 together raised approximately CAD one billion. In November 2014, the People's Bank of China designated Canada as an RMB trading hub, the first in North America. That designation allows the use of RMB in B.C.-China trade and more efficient investment for Canadian financial institutions.
Michael de Jong concluded, "This bond issue underscores our confidence in China's efforts to internationalize the RMB and open its capital markets to international investors."
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