BOFIT Viikkokatsaus / BOFIT Weekly 2019/49

Last month, China’s finance ministry issued euro-denominated debt for the first time in 15 years. The 4-billion-euro issue carried maturities of 7, 12 and 20 years. The 7-year eurobond yields 0.2 % and the 20-year eurobond 1.1 %.

The finance ministry also issued 6 billion dollars in dollar bonds last month with yields 0.35–0.7 percentage points higher than similar yields on US treasuries. After a 13-year pause, China has issued dollar-denominated debt for the past three years. The debt issued by the Chinese government is a key benchmark for corporate foreign-currency debt.

The foreign debt of Chinese businesses at the end of June totalled about 2 trillion dollars (14 % of GDP). About half of that was debt of banks, just over 10 % of finance ministry and central bank, with the remaining 40 % of other actors. Dollar debt (55 % share) dominated foreign debt. Yuan-denominated foreign debt was 34 %, and euro-debt a mere 5 %.