Shenzhen to issue new offshore bonds in HK

The Shenzhen municipal government in Guangdong province will issue offshore renminbi-denominated bonds in Hong Kong for the fourth time since 2021, further bolstering Hong Kong-Shenzhen financial collaboration by encouraging more mainland governments and corporate issuers to tap Hong Kong's fund-raising platform for channelling capital to promote regional development.

The bond issuance amount will be up to 7 billion yuan ($980 million), with maturities of two years, three years, five years and 10 years, with the bulk being social responsibility bonds, low-carbon city-themed green bonds and sustainable development bonds.

Among them, the 10-year tranche is the first time a mainland municipal government will issue outside of the Chinese mainland. It is also the first time that Shenzhen will issue green bonds themed around promoting a low-carbon city.

"The bond issuance move enriches the product types of offshore yuan-denominated financial products and the vitality of the yuan-denominated bond market in Hong Kong, bolstering yuan internationalization and upholding the central government's vision of maintaining Hong Kong as an international financial center," Hong Kong Deputy Financial Secretary Michael Wong Wai-lun said during the bond issuance roadshow.

The roadshow on Wednesday invited representatives of 33 investment institutions from countries such as Canada, South Korea and the United Kingdom.

"While Shenzhen's bond issuances in Hong Kong are an important achievement of the city's reform pilots, it is also a milestone for Shenzhen and Hong Kong to strengthen financial cooperation and promote the interconnection of capital markets in the Guangdong-Hong Kong-Macao Greater Bay Area, making new and greater contributions to building a world-class city cluster," added Li Lirong, deputy director of the Hong Kong and Macao Affairs Office of the Shenzhen municipal government.

The municipal government had issued a total of 15 billion yuan of offshore renminbi-denominated government bonds in Hong Kong for three consecutive years since 2021.

In 2023, Shenzhen's total economic output reached 3.46 trillion yuan and its total export volume has ranked first among mainland cities for 30 consecutive years. In the first half of 2024, the city's total economic value was 1.73 trillion yuan, a year-on-year increase of 5.9 percent, the municipal government said.

"With a longer term of maturities in this bond issuance, this will exert a positive and supportive impact on the offshore yuan-denominated bond market by enriching product types," Hong Kong Monetary Authority Executive Director (External) Kenneth Hui Wai-chi added.

"The decision by the Shenzhen government to issue a 10-year bond on top of a two-year bond, a three-year bond and a five-year bond for the first time, will help establish a more comprehensive yield curve for local governments by creating a benchmark for long-term maturities, and improve the interest rate transmission mechanism," said Zhao Zhongliang, head of the finance bureau of Shenzhen.

"By introducing a long-term bond product, Shenzhen can diversify the product structure of the offshore renminbi market that can offer a wider range of investment choices for investors," Zhao said.