Poland issues „Pandas” as the first country in Europe. The bonds get a lot of investor interest.

Polish Ministry of Finance signed a memorandum on cooperation with the People’s Bank of China, regarding issuing of Panda bonds in the total amount of 3 billion yuan. They will be issued to the market within 3 years, thanks to which Poland will be the first country from Europe that will offer such financial product on the Chinese market. Economists are of the opinion that as the pace of opening of the Chinese banking sector and internationalization of Chinese currency – RMB – increases, issuing panda bonds will have great prospects.

Panda bonds are international bonds issued by foreign entities in China, with specific maturity date.

The quantity of issued bonds has been steadily growing since last year. Before Poland, South Korea and Canadian British Columbia obtained the right to issue 3 billion yuan of securities.

According to the data published by China Credit Rating, currently on the Chinese market there is around 57 trillion yuan of issued bonds, out of which 25 billion yuan are Panda bonds. As the One Belt, One Road project is being completed, the need for bonds issuance will be growing. International Finance Corporation, an arm of the World Bank, predicts that in the next 5 years the value of issued Panda bonds may exceed 320 million yuan.

The sale of 3-year bonds denominated in Chinese yuan, with the nominal value of 3 billion yuan. Return on the bonds was 3.4 percent per annum, and the transaction was settled on 26 August 2016.

Entering the Chinese bond market by Poland is also support for the economic cooperation between Polish and Chinese companies, cooperation that both countries care about. Interest in exports to China among Polish entrepreneurs is steadily increasing.

In a separate communication, the Ministry of Finance informed about a simultaneous swap transaction, through which the obtained assets were exchanged for euro, and securing of future transfers regarding maintenance and repayment of bonds. The final yield after the swap into euro stood at the negative level of -0,173% per annum.

The issuance was met with a huge investor interest, the demand doubled the value of issued bonds. It was also revealed that the bonds were placed among the Chinese institutional investors too.

The issuance was carried out on the Chinese internal interbank market on the basis of the issuance programme registered by NAFMII (National Association of Financial Market Institutional Investors). The function of the issuing consortium manager was performed by the Bank of China and HSBC.

Chen Xi, a China Credit Rating specialist, stresses that issuing of the bonds is an important step towards a wider opening of the financial market in China. Issuance of Panda bonds will stimulate strengthening relations between the Chinese financial sector and foreign markets. The role of China as an international player on the financial markets will be more and more prominent in this process.