Panda bond issuance surpassed 1.6 trillion yuan in the first half of 2026, rising more than 60% from a year earlier. The market saw further diversification of issuers, low funding costs, and continued opening-up of China's financial system.
Several landmark deals were completed this year. Brazil's Ministry of Finance submitted an application on June 25 to issue the country's first yuan-denominated sovereign bond, which would make it the first Latin American nation to register a sovereign panda bond. On May 26, the Republic of Kazakhstan issued its first tranche of 2026 yuan bonds totaling 3.4 billion yuan through the Bond Connect program.
Panda bond issuers now include sovereign entities, international development organizations, and major multinational corporations and banks. Sovereign issuers such as Hungary, Slovenia, and Kazakhstan; development institutions like the Asian Development Bank, Asian Infrastructure Investment Bank, and New Development Bank; financial institutions including Deutsche Bank, Crédit Agricole, National Bank of Canada, Morgan Stanley, and United Overseas Bank; and companies like Mercedes-Benz and Bayer have all entered the market. In the first five months alone, 17 new overseas institutions gained access to China's interbank bond market.
Alongside the growing number of issuers, market structure has also improved. Medium- and long-term bonds accounted for 61% of panda bond issuance in 2025, up 17 percentage points from 2021. Secondary market trading was also active, with cumulative trading volume reaching 167.5 billion yuan in the first quarter of 2026, a year-on-year increase of 93%, and the number of participating institutions rose significantly.
Low financing costs are a key attraction. The average coupon rate is about 1.85%, with some as low as 1.7%, offering substantial interest savings even after accounting for foreign exchange swap costs. Additionally, the increased flexibility and overall stability of the yuan exchange rate make it more appealing for overseas entities to hold yuan-denominated debt.
The rapid development of the market is rooted in the steady progress of renminbi internationalization. The yuan is now the world's second-largest trade finance currency and third-largest payment currency, and it has the third-largest weight in the IMF's Special Drawing Rights basket. More and more economic actors are incorporating the yuan into cross-border settlements and investment projects. A Standard Chartered report noted that infrastructure such as Bond Connect and Swap Connect has expanded collateral and risk management options, boosting overseas institutions' appetite for yuan assets.
Wen Bin, chief economist at China Minsheng Bank, said the panda bond market and international use of the yuan are creating a virtuous cycle, helping to form a sustainable cross-border yuan circulation and enhancing the diversity and liquidity of China's financial markets. Pan Gongsheng, governor of the People's Bank of China, stated that China will continue to improve institutional arrangements for cross-border yuan use and financial infrastructure, and promote the development of the offshore yuan market.