Offshore Financial Institutions Distribute Chinese Local Government Bonds for the First Time


Financial institutions outside mainland China have been allowed to directly participate in the sale of Chinese local government debt for the first time.

The Guangdong province government recently issued the “Guangdong-Hong Kong-Macau Greater Bay Area Land Reserve Special Bond (粤港澳大湾区土地储备专项债券)” priced at 34.19 billion yuan with a term of 5 years and a yield of 3.71%.

The special bond was underwritten by China’s big four state-owned banks, and is the first local government bond in China to involve land reserve projects in multiple locations including Guangzhou, Zhuhai, Foshan, Dongugn and Zhongshan.

The bond is also the first to see offshore financial institutions directly participate in sales, with three Macau-based financial institutions allowed to participate in the distribution of the special bonds as personal wealth management products.

The three financial institutions are ICBC (Macau), Luso Bank and the Bank of China Macau Branch, according to a press release from the Monetary Authority of Macau, who have been permitted to distribute 5 billion yuan (approx. USD$726.5 million) of the special bonds.

“The bond issuance has been extremely successful,” said one source to state-owned media.

According to the source the issuance will help to drive co-operation between Guangdong and Macau, fully utilising the advantages of the special administrative zone with regard to free markets, government transparency and capital management.