Panda Bonds……A Brief About It?
Panda bonds are bonds issued by foreign issuers denominated in Chinese yuan renminbi (CNY) and placed on the domestic market of mainland China. The bond’s yields are used to support green and sustainable economy or for any other purposes.
On average, the term of circulation of panda bonds is 1 to 10 years, and the volume of issues is 1 to 4 billion yuan. These bonds can be issued by both financial and non-financial companies, as well as by governments. Issuers of panda bonds can be registered in Hong Kong and conduct their main business in China.
Issuing Sustainable Panda Bonds in the Chinese Market
Egypt has achieved a milestone by becoming the first country in the Middle East and Africa to issue sustainable panda bonds in the Chinese financial market. The bonds are worth about CHY 3.5bn, or $500m, and will be used to finance projects.
The Purpose behind Issuing Panda Bonds
The bonds serve as a new gateway for strengthening economic cooperation between Egypt and China in many important fields, including currency exchange to enhance trade exchange, exchange experiences, open areas and horizons of cooperation, build bridges of green and sustainable financing, and encourage investment as one of the key pillars, which is in line with Egypt’s strategy for the 2030 Sustainable Development Goals.
Indeed, panda bonds attracted many Chinese investors, applied sustainable financing policies in Asia and Africa, reached common goals, unified concepts regarding innovative and sustainable financing, which contributes to achieving sustainable development goals in a manner consistent with the Egyptian sovereign sustainable financing framework announced at the Finance Day at the Climate Summit COP 27 hosted by Egypt
The Minister of Finance’s Statement on the Issuance of Panda Bonds
Dr. Mohamed Maait, the Minister of Finance, stated that the Ministry was able to obtain a low interest rate of 3.5% annually for 3 years, which is more competitive compared to the rates of international dollar bond issues, especially amid the global economic challenges and the wave of inflation and high prices of food commodities, grocery goods, and electrical appliances.
He stressed that this type of bond is backed by a credit guarantee from international development banks with a high credit rating, such as the Asian Infrastructure Investment Bank (AIIB) and the African Development Bank.
He then added that the ministry, in cooperation with the credit guarantee providers, is able to complete all the preparatory procedures for issuing panda bonds in China’s financial market, the second largest global financial market in the world. As a result of this issuance, Egypt will achieve the essential goals to diversify funding sources and enter global markets.
It is clear that Egypt exerted a great effort to enhance economic cooperation between Egypt and China to alleviate the current economic challenges that the whole world is witnessing, and to provide a decent life for all Egyptians. Therefore, it issued sustainable panda bonds in the Chinese market as the first country in the Middle East and Africa to finance projects worth about 3.5 billion Chinese yuan, equivalent to 500 million dollars. To learn more about this news, click here, here, or here.
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