China panda bonds issuances down by half

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China panda bonds issuances down by half

The data from Refinitiv shows that there are half of the issuances of so-called panda bonds for January to June are down from a year ago to a six-year low of 7.9 billion yuan $1.18 billion.

Only two companies have issued panda bonds in the first half, the finance subsidiaries of BMW and Mercedes-Benz Group, down from five issuers a year ago.

In 2021, Panda bond issuances hit a full year record of 32.4 billion yuan, but this year's coronavirus resurgence has given issuers pause.

While Shanghai and other cities have emerged from the coronaviruses lockdowns that disrupted daily life and business activity for two months, the government's zero-COVID containment policy hangs like a cloud over the economic outlook.

Shinichi Seki, a senior economist at the Japan Research Institute, said there was no knowing when a lock-in might occur. With the risk of sudden factory stops or stagnant consumer spending, conditions don't lend themselves to aggressive investment by foreigners. The Refinitiv data covers Panda bond offerings through June 22 and excludes Hong Kong and Macao issuers.

European automotive companies and financial institutions are the main issuers of panda bonds, which let them control foreign exchange risk as they raise funds for new factories and other investments in China. Since their debut in 2005, the number of panda bonds has gone up.

In hopes of a post-pandemic economic recovery, Panda bond offerings increased in 2021, brushing aside the risk posed by China's real estate market downturn.

The Shanghai manufacturing hub was harder to ignore because of the lockdown. Business surveys show a shaken confidence among foreign multinationals in China.

48% of the 133 member companies said they would reduce or postpone investment plans in China, according to the American Chamber of Commerce in Shanghai. Only one company intended to increase investment. The European Union Chamber of Commerce in China found that 23% of respondents were considering moving investment in China to other markets.