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Wednesday, 16 January 2019

China Bond House

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As the renminbi gained access to the elite club of currencies in the IMF’s basket of Special Drawing Rights and China grew its global financial clout, Bank of China was at the forefront of the currency’s internationalisation, building on its unparalleled experience in both the offshore and domestic markets.

The bank established a leading position in the Panda bond market, showing its understanding of overseas clients and Chinese regulators.

BOC played a key role in Poland’s Panda bond, the first sovereign issue from Central and Eastern Europe. It was also the sole lead underwriter for Veolia Environnement, the first corporate Panda issuer from France, and joint lead underwriter for National Bank of Canada, the first financial issuer from North America.

In cultivating a new market where rules had yet to be clarified, BOC not only demonstrated its skill in navigating China’s policy environment, but also its pragmatism when needed.

New Development Bank, a China-based multilateral bank which had hired BOC as lead underwriter and sole bookrunner, dropped initial plans to issue in Panda bond format due to the difficulty of meeting local accounting standards and instead went for a regular onshore financial bond format after long discussions with regulators.

The issue was special in its own right, as the first renminbi issue from a multilateral organisation since 2009, and revived interest from other supranational issuers.

Chinese issuers dominated Asia’s international debt capital markets in 2016, and BOC responded best to increasing demand for US dollars – both from mainland issuers and investors. It was the top Chinese bank in the offshore underwriting table with US$6.2bn of league table credit from Chinese G3 deals for a 7.7% market share during the awards period, according to Thomson Reuters data, and was bookrunner on 46 Chinese G3 deals, the most of any bank.

BOC continued its strong performance in underwriting deals for Chinese financials and heavyweight state-owned enterprises such as Sinopec. Meanwhile, it rode the return of Chinese property developers to the US dollar bond market, leading deals for companies such as Country Garden.

Furthermore, the bank seized the opportunity to bring a rush of Chinese local government financing vehicles to the US dollar market, introducing first-time issuers in the investment-grade sector such as Yunnan Investment Group.

Even in the struggling Dim Sum market, BOC executed landmark deals including Hungary’s Dim Sum bond and the Chinese Ministry of Finance’s debut offering in London.

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