China’s offshore green bond market evaporates on default worries
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Chinese firms issued US$42.5 billion onshore green bonds in the first half of this year.
PHOTO: REUTERS
LONDON – After tapping foreign investors for roughly US$55 billion (S$73.9 billion) in the past five years to fund environmental projects in China, mainland companies have almost entirely given up on the offshore green bond market this year.
Excluding bonds for restructuring and refinance, three Chinese firms – China Merchants Bank, Industrial and Commercial Bank of China and Chong Hing Bank – issued three green dollar bonds totalling US$1.3 billion in the first half of 2023. In the same period in 2022, Chinese firms raised US$17.2 billion across 38 bonds, according to data compiled by Bloomberg.
Foreign investors have soured on Chinese dollar bonds, green or otherwise, in the light of the ongoing developer defaults and a softer-than-expected post-Covid-19 recovery, said CreditSights senior China credit analyst Zerlina Zeng.
Ms Zeng said: “We do not expect offshore bond investors to turn overly enthusiastic towards Chinese issuers unless we see a sustainable rebound of the China property sector and an easing of US-China tension.”
China’s green dollar bond issuance fell more than for non-green issues.
Chinese corporates sold US$113.8 billion in dollar bonds in 2022, down 41 per cent from 2021. So far this year, issuance is down another 51 per cent.
Interest rates hikes in the United States have also pushed up borrowing costs, said Ms Puja Shah, head of ESG debt capital markets at JPMorgan Chase & Co for Asia ex-Japan.
Still, Beijing’s support for green finance remains strong, and lower interest rates have lifted the domestic green bond market, said Sustainable Fitch analyst Jia Jingwei.
Chinese firms issued US$42.5 billion onshore green bonds in the first half of 2023, exceeding the US$36.2 billion raised in the first half of 2022.
Large Chinese state-owned entities will continue to be able to access the onshore bond market as well as low-cost bank loans.
Despite the fall-off in the offshore market, China remained the biggest green bond market in 2022 with US$76.25 billion in issuance, according to data from the Climate Bonds Initiative.
China is working with the European Union on a common ground taxonomy that will greater standardise green finance definitions to facilitate cross-border issuance and investment. BLOOMBERG
