Global Issuers Flock to Yuan Bonds at Record Pace

International borrowers are issuing yuan-denominated debt at an unprecedented pace in 2026, seizing on significantly lower borrowing costs in China’s onshore bond market. Panda bond issuance — yuan debt sold on the Chinese mainland by overseas institutions — reached 153 billion yuan ($22.6 billion) through June 18, already exceeding 80% of the full-year total for 2025, according to data from Caixin Global.

A Record-Breaking Surge

The first quarter of 2026 set an all-time quarterly high, with foreign borrowers executing 45 panda bond deals raising a combined 88.24 billion yuan ($12.9 billion) — a 101.45% year-on-year increase in volume and an 87.5% rise in deal count, as reported by China Daily. By April, overseas institutions had issued 52 panda bonds totaling 102.24 billion yuan ($14.99 billion), up 91.81% year-on-year, with the outstanding balance rising 37.64% to 499.73 billion yuan, according to Global Times.

The offshore dim sum bond market is also booming. Issuance topped 540 billion yuan in early 2026, more than double the 226 billion yuan from a year earlier, with offshore institutions accounting for 80% of new offshore bond issues, up from 50% a year prior.

The Cost Advantage Driving Demand

The primary driver behind the surge is a wide interest rate differential between China and Western markets. China’s 10-year bond yield sits at approximately 1.82%, compared to 4.46% for U.S. Treasury equivalents — a spread of roughly 260 basis points that makes yuan borrowing approximately 60% cheaper than equivalent U.S. dollar debt, as detailed by Blockonomi.

Zhang Ming, deputy director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, told China Daily that since the second half of 2023, yields on 10-year Chinese government bonds have stayed well below those of U.S. 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 said.

Major Issuers Enter the Market

Deutsche Bank has been a prominent participant, issuing two panda bonds in 2026. In March, the bank placed a record-breaking 5.5 billion yuan multi-tranche bond — the largest ever by a foreign bank. In late May, it followed with a second issuance of 3.5 billion yuan, with the three-year tranche priced at a historic low coupon of 1.72%, according to a Deutsche Bank press release.

“This issuance is a powerful testament to our commitment to being the Global Hausbank for our clients in China,” said Rose Zhu, Deutsche Bank China Chief Country Officer. Fiona Ip, Head of APAC Treasury at Deutsche Bank, added that the issuance “reflects robust investor confidence in Deutsche Bank’s credit strength and establishes the renminbi as a key component of our global funding.”

Other notable issuers include Slovenia, which in March became the first central and eastern European eurozone country to issue panda bonds, raising 4 billion yuan at a 1.89% coupon. The New Development Bank issued 7 billion yuan in April, bringing its cumulative panda bond issuance to 87.5 billion yuan. Kazakhstan’s Samruk-Kazyna sovereign wealth fund launched the first-ever Central Asian panda bond, raising 3 billion yuan.

Confidence in China’s Economy

Wan Zhe, a professor at Beijing Normal University, told Global Times that “lower financing costs of the yuan versus the U.S. dollar, favorable policies in the issuance of panda bonds, for example, green channels for bond issuance and tax benefits, along with new types of panda bonds tied to innovation and green development, are driving the expansion of panda bond issuance this year.”

Hu Qimu, deputy secretary-general of the Forum 50 for Digital-Real Economies Integration, said the surge “underscores the confidence of foreign financial institutions in the prospects of China’s economy, as the large economy is resilient and not subject to geopolitical disturbances.”

Louis Luo, deputy head of macro investments at Aberdeen Investments, described Chinese government debt as “a safe haven in the current environment — a unique combination of global energy supply shocks and China’s domestic resilience.”

Broader Implications: De-Dollarization and Yuan Internationalization

The panda bond surge is part of a broader structural shift in global capital markets. The U.S. dollar’s share of global reserves dropped to 56.32% in 2025, its lowest recorded level since 1995, while the dollar index fell 9.6% in full year 2025. China’s U.S. Treasury holdings declined to $682.6 billion as of November 2025, down from $1.32 trillion in 2013, reflecting deliberate portfolio rebalancing.

Pan Gongsheng, governor of the People’s Bank of China, noted 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% year-on-year. He also announced new yuan internationalization measures at the Lujiazui Forum on June 17.

Ming Ming, chief economist at CITIC Securities, expects the momentum to continue: “Strong refinancing demand and a continued low-cost domestic funding environment are expected to keep panda bond issuances at elevated levels throughout 2026.”

What to Watch Next

Market participants are closely watching several factors that could influence the trajectory of panda bond issuance in the second half of 2026. Further monetary easing by the PBOC would widen the interest rate differential and accelerate issuance, while any shift in U.S. Federal Reserve policy could narrow the cost advantage. The diversity of new issuers — particularly whether more Western sovereigns follow Slovenia’s lead — will also be a key indicator of the market’s maturation.

For now, the message from the data is clear: global capital is voting with its feet, and an increasing share of that vote is being cast in yuan.