China is making a comeback to the international debt market after a three-year break, planning to issue euro-denominated bonds amid expectations of a European Central Bank interest rate cut. The Ministry of Finance announced that up to €2 billion ($2.2 billion) of notes will be issued in Paris during the week of Sept. 23. The last time China accessed the foreign currency debt market was in November 2021, according to Bloomberg.
This issuance aims to strengthen China’s yield curve, offer global investors easier access to sovereign debt, and potentially encourage corporate issuers. Sales of EU government bonds have risen by 8% this year through Sept. 5, according to Bloomberg data.
Chinese officials are likely seeking to diversify their bond investor base and normalize international fundraising as European rates are expected to fall. The funds raised could be used for overseas projects or repatriated as capital inflows. A large order book is anticipated, reflecting strong demand for Chinese debt. In 2021, Beijing received orders for more than four times the bonds it offered.
This move follows Chinese President Xi Jinping’s meeting with French President Emmanuel Macron in May, where the two nations signed 18 cooperation agreements.