Panda bond
Encyclopedia
A Panda bond is a Chinese renminbi
-denominated bond
from a non-Chinese issuer, sold in the People's Republic of China
. The first two Panda bonds were issued in October 2005 on the same day by the International Finance Corporation
and the Asian Development Bank
. Their terms were 1.13 billion yuan of 10-year bonds at a 3.4% yield and 1 billion yuan of 10-year bonds at a 3.34% yield. The Chinese government
had been negotiating for several years about implementation details before permitting the sale of such bonds; they had been concerned about the possible effects on their currency peg
. Eventually, it was agreed that funds raised from sales of Panda bonds would have to remain in China; issuers would not be permitted to repatriate such funds.
In May 2010, rules were liberalised and more issuers were allowed, with the restriction on proceeds not being remitted abroad lifted.
Renminbi
The Renminbi is the official currency of the People's Republic of China . Renminbi is legal tender in mainland China, but not in Hong Kong or Macau. It is issued by the People's Bank of China, the monetary authority of the PRC...
-denominated bond
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
from a non-Chinese issuer, sold in the People's Republic of China
People's Republic of China
China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...
. The first two Panda bonds were issued in October 2005 on the same day by the International Finance Corporation
International Finance Corporation
The International Finance Corporation promotes sustainable private sector investment in developing countries.IFC is a member of the World Bank Group and is headquartered in Washington, D.C., United States....
and the Asian Development Bank
Asian Development Bank
The Asian Development Bank is a regional development bank established on 22 August 1966 to facilitate economic development of countries in Asia...
. Their terms were 1.13 billion yuan of 10-year bonds at a 3.4% yield and 1 billion yuan of 10-year bonds at a 3.34% yield. The Chinese government
Government of the People's Republic of China
All power within the government of the People's Republic of China is divided among three bodies: the People's Republic of China, State Council, and the People's Liberation Army . This article is concerned with the formal structure of the state, its departments and their responsibilities...
had been negotiating for several years about implementation details before permitting the sale of such bonds; they had been concerned about the possible effects on their currency peg
Fixed exchange rate
A fixed exchange rate, sometimes called a pegged exchange rate, is a type of exchange rate regime wherein a currency's value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold.A fixed exchange rate is usually used to...
. Eventually, it was agreed that funds raised from sales of Panda bonds would have to remain in China; issuers would not be permitted to repatriate such funds.
In May 2010, rules were liberalised and more issuers were allowed, with the restriction on proceeds not being remitted abroad lifted.
See also
- Economy of the People's Republic of ChinaEconomy of the People's Republic of ChinaThe People's Republic of China ranks since 2010 as the world's second largest economy after the United States. It has been the world's fastest-growing major economy, with consistent growth rates of around 10% over the past 30 years. China is also the largest exporter and second largest importer of...
- Chinese financial systemChinese financial systemChina's financial system is highly regulated and has recently begun to expand rapidly as monetary policy becomes integral to its overall economic policy...
- Banking in ChinaBanking in ChinaChina's banking system has undergone significant changes in the last two decades: banks are now functioning more like banks than before. Nevertheless, China's banking industry has remained in the government's hands even though banks have gained more autonomy...