Chinese Corporate Dollar Bond Sales Jump to Highest Since 2022

(Bloomberg) — China’s $600 billion corporate dollar bond market is showing signs of resurgence, as optimism over artificial intelligence advances and recent government steps to ease the property crisis help boost confidence.

Chinese firms have sold about $13 billion of dollar-denominated notes so far this year in publicly announced deals, according to data compiled Bloomberg. That’s double the year-earlier total and the highest level since 2022. 

The pipeline is mostly driven by financial firms and local government financing vehicles, but some beaten-down companies including those from the property sector are returning to the market after a multi-year absence, building on momentum that emerged in November.

The improving credit market sentiment comes as tech companies race to develop more AI products and Beijing takes steps to prevent property debt defaults. Meanwhile, worries that President Donald Trump’s tariff policies could stunt US growth are prompting investors to look at options elsewhere.   

Wei Liang Chang, a strategist at DBS Bank Ltd., expects issuance to improve further this year. “Investors are certainly receptive to new issuance by state-backed names, given the scarcity of Asian USD bonds in the market, and a need for diversification given US policy risks,” he said. 

In the secondary market, dollar notes issued by Chinese investment-grade companies are trading at tight spreads. In recent weeks, Tencent Holdings Ltd.’s notes due 2029 have been hovering around the tightest spread levels in at least five years, Bloomberg-compiled data show. Chinese high-yield dollar notes on average have the lowest premium relative to its US equivalents in seven months.

“Rough seas make skilled sailors,” said Gary Ng, a senior economist at Natixis, noting that the survivors in China’s dollar bond market now have lower general credit risks. As the US market sees volatility due to Trump’s policies, China may offer more stability at this stage, he added. 

While most defaulted Chinese developers are still grappling with sluggish property sales and difficult debt restructurings, some property-related companies are taking the plunge into new issuance. 

Just one month after the property sector saw its first dollar bond sale in two years, Beijing Capital Group Co., a locally state-owned firm that once derived about 40% of its revenue from real estate development, sold its first dollar bond since 2021, according to Bloomberg-compiled data. 

The $450 million bond was priced last week with book orders 10 times the issuance volume and at a coupon rate 60 basis points lower than the initial price guidance, signaling strong investor demand.  

Chinese dollar bonds will continue to outperform other regions in terms of spread, due to limited supply and onshore support, according to Ting Meng, senior Asia credit strategist at ANZ Bank China Co. There could be flows into the Greater China equity market, but she doubts if there would be significant movements into bonds, as spreads are too tight.

Bloomberg’s China investment-grade dollar bond index had its best month in more than a year in February in terms of total returns. The high-yield dollar bond index has already generated a 3.8% year-to-date return, beating its pan-European and US peers. 

Natixis’s Ng says it is important to look at the composition of investors in these deals. “Without the comeback of foreign investors, it is hard to say the sentiment has genuinely improved,” he said. 

–With assistance from Jackie Cai.

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