Panda bond issuances surged to a record in the first quarter, as booming demand more than doubled total fundraising from a year earlier, underscoring the growing appeal of renminbi-denominated assets.

Panda bonds are RMB-denominated bonds issued by overseas institutions in China's onshore bond market. In the first quarter, issuance of panda bonds hit an all-time quarterly high, with 45 deals raising a combined 88.24 billion yuan ($12.9 billion).

This marked year-on-year increases of 87.5 percent in the number of deals and 101.45 percent in total volume, according to Wind Info.

Analysts expect further expansion on the back of lower financing costs and steady progress in renminbi internationalization.

The surge has been driven in part by shifts in the renminbi's exchange rate against the US dollar and the changing interest rate differential between the two currencies, said Zhang Ming, deputy director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences.

Since the second half of 2023, yields on 10-year Chinese government bonds have stayed well below those of US Treasuries, making renminbi financing cheaper and more attractive. With the Chinese currency now moving in both directions against the dollar and long-term rates remaining comparatively low, the development of renminbi-denominated debt products is poised to accelerate, Zhang wrote in an article published in Caijing Magazine last month.

Further momentum has come from the institutional opening-up of China's bond market and capital account, which made onshore panda bond issuances more appealing to overseas borrowers. Streamlined registration procedures and greater flexibility in the use of proceeds — whether repatriated abroad or deployed domestically — have also improved efficiency, supported by "green channel" mechanisms for cross-border capital flows.

At the same time, the steady advance of renminbi internationalization has boosted genuine demand for renminbi funding among overseas entities, Zhang added.

Notably, the panda bond market has shifted toward a more diversified issuer base this year, led by foreign institutions, compared with the past when issuers were mainly red-chip companies — firms with primary business operations in China but registered overseas.

Ming Ming, chief economist at CITIC Securities, said nearly half of panda bond issuers in the first quarter were purely overseas entities, including multilateral institutions.

New types of panda bonds tied to innovation, green development and sustainability are emerging as fresh growth drivers.

Analysts at China Chengxin International Credit Rating Co said the panda bond market is shifting from a phase of rapid expansion in scale to one focused on high-quality development.

Pan Gongsheng, governor of the People's Bank of China, the central bank, said at a recent news conference that foreign governments, international development institutions, financial institutions and large enterprises issued more than 170 billion yuan of panda bonds in 2025, with outstanding volume rising 34 percent year-on-year. Currently, the markets for panda bonds and dim sum bonds, which refer to RMB-denominated bonds issued outside the Chinese mainland, are highly active.

Strong refinancing demand and a continued low-cost domestic funding environment are expected to keep panda bond issuances at elevated levels throughout 2026, said Ming of CITIC Securities. China's large State-owned commercial banks remain the main underwriters of panda bonds.

Beyond the surge in the panda bond market, large State-owned commercial lenders have continued to expand the cross-border renminbi business, with steady growth in 2025.

Liu Jun, president of ICBC, said at the bank's 2025 results briefing on March 27: "If we talk about the internationalization strategy of Chinese financial institutions today, the core theme must be the internationalization of the renminbi."

jiangxueqing@chinadaily.com.cn