Dim Sum Bonds Set to Gain Hong Kong Popularity

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Sept. 12 – Several Chinese banks, including China Construction Bank (CCB), are preparing to make use of the new offshore RMB yuan bond market – the so-called “dim sum” bonds.

The launch of the first significant tranche of dim sum bonds – bonds denominated in RMB but issued in Hong Kong – is expected to be with CCB, who are looking to allocate RMB80 billion later this year. Dim sum bonds are attractive to foreign investors who desire exposure to yuan-denominated assets, but are restricted by China’s capital controls from investing in domestic Chinese debt. The issuers of dim sum bonds are largely entities based in China or Hong Kong, and occasionally foreign companies.

The term is derived from the Chinese cuisine that involves serving a variety of small delicacies and is especially popular in Hong Kong. The dim sum bond market is still in its infancy but is expected to grow rapidly over time. To date, use of such bonds has been limited, amounting to about 1 percent of US$145 billion worth of yuan-denominated debt issued in Mainland China.

Should CCB go ahead, other Chinese banks are expected to follow quickly, as funding levels in the dim sum bond market remain low compared with onshore banks.

Dezan Shira & Associates maintains an office in Hong Kong. For advice on Hong Kong incorporation, tax and related issues, please contact hongkong@dezshira.com.