Goldman Sachs leads record renminbi borrowing by US banks

{"text":[[{"start":7.3,"text":"US banks led by Goldman Sachs have borrowed record amounts of renminbi this year as low interest rates attract more foreigners to China’s offshore debt markets, boosting the role of the currency in global finance. "}],[{"start":20.65,"text":"The jump in bank borrowing is part of a broader surge in the issuance of offshore renminbi-denominated debt, driven by huge demand among yield-hungry mainland Chinese investors as Beijing makes it easier for them to buy fixed-income products in Hong Kong."}],[{"start":35,"text":"While yields in Hong Kong are higher than on the mainland, they are lower than those available to borrowers in most other global markets."}],[{"start":42.7,"text":"As a result, total borrowing in so-called dim sum bonds — issued outside the mainland, mostly in Hong Kong, and denominated in renminbi — has hit Rmb300bn ($44bn) so far this year, more than twice the amount at this point in 2025, itself a record year."}],[{"start":61.900000000000006,"text":"Self-led issuance by US banks, meaning they manage their own debt issuance, has surged to Rmb47.5bn, also a record, with Goldman making up the majority."}],[{"start":75.5,"text":"“There’s so much demand for offshore renminbi assets. It provides an attractive alternative source of funding for the firm,” said Isaac Wong, Goldman’s head of fixed income, currencies and commodities distribution for Asia ex-Japan."}],[{"start":null,"text":"

"}],[{"start":89.65,"text":"Borrowers who have tapped the market this month include Portugal, along with government entities such as Finland’s MuniFin, a public credit institution, and the Korea Development Bank. At the beginning of the year, the Nordic Investment Bank and the Swedish Export Credit Corporation also issued dim sum bonds."}],[{"start":107.4,"text":"“There’s a borrowing frenzy right now in offshore renminbi,” said John Woods, chief investment officer for Asia at Lombard Odier. “You’ve got everyone from the Indonesian government to Morgan Stanley issuing [renminbi] debt.”"}],[{"start":120.95,"text":"Goldman has become the largest foreign issuer of dim sum bonds and the second-largest overall after the state-owned Bank of China. It has borrowed Rmb32.1bn through the bonds this year, accounting for about 10 per cent of issuance."}],[{"start":135.1,"text":"Supportive policies from Beijing have helped increase the amount of mainland Chinese capital able to invest in bonds in Hong Kong, part of a broader push to internationalise its currency."}],[{"start":146.35,"text":"At last month’s China Development Forum — a high-level meeting known as China’s Davos — central bank governor Pan Gongsheng promised “diversified monetary and financial co-operation to further develop the offshore renminbi market”."}],[{"start":161.9,"text":"Last year, Beijing significantly broadened access to the country’s Bond Connect programme, which allows mainland investors to buy fixed-income products in Hong Kong, opening it to insurers and other non-bank financial institutions for the first time."}],[{"start":null,"text":""}],[{"start":175.3,"text":"The moves come as historically low yields in mainland China have left Chinese institutional investors in pressing need of higher-yielding products to cover their liabilities. This has prompted a flood of Chinese capital into areas such as high-dividend bank stocks in Hong Kong."}],[{"start":191.70000000000002,"text":"China’s benchmark 10-year government bond is trading at a yield of about 1.75 per cent. In comparison, the coupon on Goldman’s 10-year dim sum bond is 3 per cent."}],[{"start":202.75000000000003,"text":"The US bank said it had beefed up its operations to tap demand for offshore renminbi issuance aggressively and early. It expected competitors to follow suit."}],[{"start":212.60000000000002,"text":"Goldman’s Wong said the bank was swapping the proceeds from its dim sum bonds into dollars and hedging its currency risk."}],[{"start":221.3,"text":"“We can easily deploy proceeds across the firm and across different jurisdictions,” he said, adding that the money raised would not go towards Goldman’s mainland operations."}],[{"start":230.95000000000002,"text":"Renminbi funds raised in Hong Kong are not subject to China’s strict cross-border capital controls."}],[{"start":237.35000000000002,"text":"Wong added that he expected Beijing to continue expanding the Bond Connect programme and Goldman would also press on with borrowing in the offshore renminbi market for “as long as investor demand is there”. "}],[{"start":null,"text":""}],[{"start":248.55,"text":"Economists said the rise in renminbi borrowing by big international banks showed China’s currency was taking over a role once played by the Japanese yen — a role diminished by sharply rising borrowing costs in Japan over the past two years."}],[{"start":263.35,"text":"The offshore renminbi “has become a major funding currency for lack of a better option”, said Alicia García-Herrero, chief Asia-Pacific economist at Natixis. “The yen is just not what it used to be in terms of funding costs, especially at the longer end.”"}],[{"start":278.75,"text":"Yields on Japan’s benchmark 10-year government bond have risen to more than 2.4 per cent, up from 0.61 per cent at the start of 2024. Yields on the equivalent Chinese bond fell below Japan’s last November for the first time."}],[{"start":295.4,"text":"While the appeal of dim sum finance to foreign borrowers has risen over the past year, the same is not true for domestic Chinese borrowers."}],[{"start":303.09999999999997,"text":"“Foreign issuers have been the key driver of this growth this year,” said Jameson Zuo, director of ratings at CSPI Ratings, a Hong Kong-based Chinese rating agency. “Last year it was mainly driven by big Chinese tech companies.”"}],[{"start":318.15,"text":"The increase in such borrowing comes as China seeks to expand the use of its currency in global finance, despite keeping its capital account closed."}],[{"start":326.95,"text":"Although most investors in dim sum bonds are currently from mainland China, creating a pool of renminbi-denominated assets outside onshore capital controls is an important feature of that expansion."}],[{"start":339.55,"text":"“Beijing encourages foreign issuers to borrow and issue in renminbi as it promotes renminbi as a global funding and reserve currency, expands the offshore renminbi market and reduces reliance on the US dollar,” said Lombard Odier’s Woods."}],[{"start":362.85,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1777015709_8429.mp3"}